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NNPC opts for direct sale of crude

In a major shift, the Nigerian National Petroleum Corporation (NNPC) yesterday opted to, henforth, buy crude oil and petroleum products directly from credible international companies.

This approach, it said, would ensure more transparency and eliminate middlemen in the crude oil exchange for product matrix.

NNPC spokesman Mr. Ohi Alegbe said the time had come for the replacement of the 11 Offshore Processing Arrangement (OPA) options with the more efficient Direct-Sale-Direct Purchase (DSDP) alternative.

Alegbe explained that the NNPC took its position after the evaluation of pre-qualified bidders showed that most of the 44 companies earlier shortlisted for the next stage of the tender process only had affiliations to refineries abroad, thereby bringing a toll on the value chain.

The NNPC said if allowed to subsist, the development would constitute a significant value loss to the federation through accruals.

“In this regard, only bona fide owners of refineries identified in the ongoing OPA Tender Evaluation process will be further engaged. The identified refineries will be subjected to due diligence and analysis by NNPC-appointed consultants to confirm suitability in line with international best practice,’’ the corporation said.

NNPC said the call for commercial bids issued to the 44 shortlisted bidders made up of 34 international firms and 10 indigenous companies have been withdrawn.

But the Nigerian Extractive Industries Transparency Initiative (NEITI) called for the reduction of crude oil allocation to NNPC.

Speaking at a valedictory ceremony at the NEITI head office, Abuja, the outgoing Executive Secretary, Mrs. Zainab Ahmed explained that of all the crude allocated to domestic refineries, not more than 28 per cent is utilised; about 35 per cent is exported.

The revenue from the exported crude, according to her, is spent on financing NNPC operations. But, she insisted that if the Federal Government prunes crude allocation to the corporation it would be compelled to seek other means of financing and become more efficient.

Mrs. Ahmed said: “My advice and what NEITI has been recommending is that we should reduce the level of crude that we allocate to the NNPC. We have said over time that this will serve as an incentive for the refineries to improve their performance capacities.

“ So if we reduce what we allocate to NNPC today, the refining capacity plus small margin, it will improve more capacity development for the refineries.

In the past, the revenue from the sale of domestic crude oil had served as the major means of financing NNPC. If we reduce that, it means that NNPC has to look for some other ways to finance its operation and therefore it will be forced to become more efficient. “

She advised the Federal Government to review its expenditure on Petroleum Support Fund (PSF) also known as fuel subsidy.

Mrs. Ahmed advised the government to remove the subsidy in phases.

Asked whether the government now has accurate record of oil produced in Nigeria, Mrs. Ahmed said it is difficult for NEITI to ascertain what is produced until the metering issue is addressed.

The minister-designate said what NEITI calculates in its audit is the royalty that is paid at the point of export instead of royalties at the well-head and flow stations forming its bases of analyses.

She said: “That means that the country is losing significant revenue for that gap. And for that reason, we are unable to ascertain what is missing because if you don’t know what is produced at the point of production, and you are only measuring what is produced at the point of export, everything that is in within is based on different kinds of estimates and calculations and so on. So it is difficult for us in NEITI to say that we know exactly what is being produced unless this metering issue is addressed.”

Listing NEITI’s achievement, she said following the regular reporting of NEITI, the government recovered over $2.4billion into Federation Account.

The organisation, she said, had also through its audit reports made disclosures of over $billion as recoverable revenue to government.

NEITI, according to her, has prepared the next audit, which only now awaits the approval of a yet to be constituted board to be released.

She said the organisation has till next month to release the report or risk the sanction of the Extractive Industries Transparency Initiative (EITI).

She handed over to the Director of Communications, Dr. Orji Ogbonnaya Orji, the establishment’s most senior director.

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