Nigeria shores up fuel needs with BP deal ahead of election
Africa’s leading oil producer is almost wholly reliant on fuel imports as its refineries barely function
London — Nigerian state oil firm NNPC said on Thursday that it had signed a crude-for-product deal with BP for the next six months to help meet the country’s petrol needs over the holidays and ahead of its general election early next year.
Despite being Africa’s biggest oil producer and an Opec member, Nigeria is almost wholly reliant on fuel imports as its refineries barely function after years of neglect and infrastructure sabotage. Periodic fuel shortages are common, with cars lining up at the pump sometimes for days, especially during the Christmas period.
President Muhammadu Buhari, whose popularity is already sagging, cannot afford to be seen as unable to meet the needs of Nigeria’s 190-million population.
It was not immediately clear what volume would be allocated to BP. The NNPC already has 10 similar deals for a total of just over 300,000 barrels per day of crude out its close to 1.9-million bpd production in October.
The NNPC imports about 70% of Nigeria’s fuel needs, mainly petrol, via swap contracts known as direct sale direct purchase. Foreign firms must pair up with a local company to deliver the products. Under the direct sale direct purchase model, the NNPC sells crude oil to refiners or trading houses, which, in return, supply mainly petrol but also other petroleum products such as diesel.
The NNPC initially announced the deal on Twitter late on Wednesday without providing details. BP declined to comment. In its statement, NNPC said the arrangement with BP would account for 20% of the country’s total petrol needs.
The NNPC said BP will partner with Nigerian firm AYM Shafa. BP was not originally among the companies with which the NNPC signed direct sale direct purchase agreements.
“BP’s partnership with AYM Shafa … makes it a perfect fit for our plans to ensure that there is adequate supply of products throughout the coming Yuletide and even beyond the election period,” NNPC MD Maikanti Baru said, adding that AYM Shafa has 150 retail outlets and depots.
The existing contract holders — including trading houses Vitol, Trafigura, Mercuria and French oil major Total — started in mid-2017. The NNPC extended the existing contracts to June 2019, but several trading sources in the consortiums have requested new price terms, sources with direct knowledge said.
Higher oil prices in 2018 have helped boost Nigeria’s foreign exchange reserves, but the weakness in the country’s currency against the dollar has forced the central bank to spend billions to keep the naira stable and to prevent an unwelcome spike in its import bill.