NNPC TO REPS: NO SHADY DEAL IN SWISS OIL SWAP

*Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mr. Andrew Yakubu (right), with members of the House Committee on Petroleum Resources Downstream, Upstream and Justice, investigating the alleged involvement of NNPC with Swiss oil dealers in Abuja…yesterday.

The Nigerian National Petroleum Corporation, NNPC, yesterday at the House of Representatives denied claims that it disposed crude at prices lower than market to Swiss oil trading companies.

Appearing before the House Committees on Justice, Petroleum Resources Upstream and Downstream, the NNPC through its Group Managing Director, GMD, Andrew Yakubu said its pricing strategy is aligned to international best practice in the industry.

According to Yakubu, “ Since the publication of the allegations, NNPC has  left no stone unturned in investigating issues raised.

“Our prices are based on a reference to the bench mark crude Brent whose prices are published by Platts for the international trading community, a premium/differential for individual crude grades and the selection of an option”

The denial became necessary due to summon the corporation received from the House to appear and explain rationale behind allegations that it connived with Swiss companies to rob the country of billions of dollars.

It noted that the claim that the Swiss company Vitol and Trafigura account for over 36 percent of the total volume disposed by the corporation was false as only 30.7 million barrels out of the total of 341.07 million barrels disposed by the corporation in 2013 was the actual figure. This he said represents only 9 per cent.

NNPC further disclosed that additionally, Nigerian traders collectively account for 98.2 million barrels during the same period, while the other international traders including the Swiss Trading companies account for 61.2 million barrels. Also, that off-shore and the Nigerian refineries took 36.2 and 38.3 million barrels respectively.

Yakubu said the NNPC trading companies account for 83.5 million barrels and that there is also the bilateral arrangement that account for 23.6 million barrels.

“We further wish to state that the selection of buyers of Nigerian crude is done on transparent and competitive basis that seeks to establish financial and technical capabilities, promotion of Nigerian Content and general quality and safety assurance.

“The overall objective is to ensure value maximization, market penetration and spread, geopolitical balancing and to meet Bilateral Agreements of the Federal Government”, Yakubu stated.

On selection of traders, the NNPC said it has standard criteria which evaluates buyers’ facilities, volume of transactions, turn-over and financial of the companies which is applicable to all including the Swiss company.

Concerning the “Bernes Declaration” which broke the allegation that 100% of Nigerian crude are disposed through private trading companies rather than by the NNPC selling directly to the market with attendant loss of trading margins, Yakubu stated that the federation marketing strategy of the disposal of Nigerian crude is sold on Free-on-Board basis.

According to him, this allows the transfer of delivery risk to off-takers at the loading port and that it was standard practice by most national oil companies. He noted that the advantage lies in the fact that it excludes potential lien issues associated with federation borrowing and other litigations.

It stated that the Bernes report was false since the NNPC does not sell directly to the international market, Duke Oil and other NNPC affiliated trading companies participate in the disposal of Nigerian crude oil account for 24.5 per cent of the total disposals.

Clearing the NNPC of any wrong doing in sale of un-utilised oil at knock down prices to companies through the crude oil-product exchange (Swap Arrangement), the GMD said the corporation Act mandates it to supply petroleum products to the federation as supplier of last resort. This he said is to meet its obligation of 445,000 barrels of crude oil assigned to the corporation at international price for domestic refining.

He further disclosed that the NNPC disposes unrefined portion of the assignment through direct export or other secondary arrangements including “Swap” to ensure procurement and delivery of refined petroleum products.

He defended the Swap arrangement by declaring that it was a known practice in the industry where equivalent value of product is exchanged for crude oil off take.

The NNPC closed its case by declaring that the claims by the “Berne Declaration” are baseless and without material substance and, therefore, requested the committees to set it aside in its entirety.

Source: Daily Newswatch