Nigerian crude oil to be sold directly to refiners

Henceforth, the Nigerian National Petroleum Corporation (NNPC) will sell crude oil directly to refiners and purchase refined oil products from them, a measure intended to cut out middlemen and curb graft from the oil sector.

The spokesman of NNPC, Ohi Alegbe in a statement on Tuesday, November 3, 2015, said the move was “designed to enshrine transparency and eliminate the activities of middlemen in the crude oil exchange” that have characterized the hitherto swap scheme, Reuters reported.

Associated Press further cited him as explaining that the decision was made after a screening of previously used and prequalified petroleum product importers revealed almost all the 34 international and 10 local companies were middleman businesses.

NNPC had shortlisted 44 companies for the swap agreements for 2016, also called "offshore processing arrangements" (OPAs), but said most of them did not directly operate refineries, Reuters said. Getting oil products from such companies, NNPC said in the statement, would "constitute a significant value loss" for the country and added that, "Only bona fide owners of refineries identified in the ongoing OPA tender evaluation process will be further engaged.”

Associated Press reports citing NNPC website that Nigeria produces 2 million barrels of crude a day. Nigerians consume about 9 million liters (2.4 million gallons) of gas daily, almost all imported because local refineries are inefficient. One barrel of crude produces about 30 gallons of diesel or fuel.

Reports further indicate that Nigeria is reliant on imported gasoline, kerosene and other petroleum products. In addition to the swap arrangement, it also relies on an import subsidy scheme that is itself fraud-ridden and expensive.