132 firms bid to buy 14 cargoes of Nigerian crude monthly

ONE hundred and thirty-two local and international companies yesterday offered to buy 14 cargoes of Nigerian crude oil monthly in the Nigerian National Petroleum Corporation (NNPC) 2019/2020 Direct Sale and Direct Purchase (DSDP) bid opening in Abuja.

Group Managing Director Dr. Maikanti Baru, who presided over the opening, said that the corporation would receive about 14 billion litres in a year as exchange for the crude.

“Well, we are looking at about 14 cargoes a month kind of situation and about 14billion litres in a year of products,” he said.

Baru described the occasion as a landmark event in the bid to miximise value and guarantee energy security for the nation.

The DSDP scheme was introduced in 2016 “with efficient and cost systems and processes to plug the value eroding loopholes of the January 2015 Offshore Processing Agreement (OPA) contracts”.

The NNPC said:  ”Since the inception of the DSDP scheme in 2016 to March 2019, 29.5million meteoric tons (39.6 billion liters) of petroleum products have been supplied under the scheme, representing over 90 per cent of the national requirement.”

Baru explained that through a transparent competitive bidding and evaluation process, the scheme had enlisted a robust supplier mix comprising the big international players and strong Nigerian downstream companies for supply flexibility and local capacity development.

According to him, “the scheme prides itself with a competitive pricing framework (lower than the Petroleum Product Pricing Regulatory Agency (PPPRA) benchmark) which  over the years has ensured significant reduction in product demurrage cost in the range of 84 per cent and cost savings of about $2.2 billion.”

He explained that the 2019-2020 DSDP tender objectives were to engage reputable companies for the Direct Sales of Nigerian crude oil and Direct Purchase of petroleum products.

The objectives are also to ensure that the selection of off-takers is aligned with tested, transparent and accountable procedures in compliance with the Public Procurement & Nigerian Content Acts.

The scheme is also to sustain transparency in all the nation’s processes and establish the best partners through a robust mix of big international players and strong Nigerian downstream companies to ensure supply reliability and local capacity development.

According to Baru, the scheme was also initiated to encourage local downstream companies while leveraging on the capacity and expertise of foreign partners.

He said the DSDP had been delivering value optimisation to the federation.

Agents of the Bureau of Public Procurement (BPP) and the Nigerian Extractive Industries Transparency Initiatives (NEITI) monitored the bid opening.

There was, however, a mild drama when the GMD expressed fears over the commencement of the opening after 12:00 noon.

He attributed the late opening of to the failure to invite the media to air the exercise before he insisted on inviting and waiting for their arrival.

Baru, who asked whether the lateness marred the transparency of the exercise was told by the agent of the BPP that it was immaterial as far as no company was allowed to submit any bid after  noon.

Speaking, the Group General Manager, Crude Oil Marketing Division, Mele Kyari, spoke of certain criteria that the bidding firms must comply with.

“Capacity is everything”, he said, adding:  “As you are aware today, a cargo of crude oil today cost close to $72 million.  So, nobody who cannot raise a Letter of Credit for $72 million can do this business. It is impossible. At times you are supposed to pay for more than a cargo. It means that you are supposed to raise a letter of credit of $170 million. It means you must have a clear net worth that when we take away your asset and liability, you still have some money that you can fall on.”