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 Global commodity traders, refiners and Nigerian dealers jockey at an
annual tender for access to the OPEC member's prized crude oil,
which is easy to refine and produces more high-value fuels.
The contracts cover around 340 million barrels of oil, worth close
to $40 billion annually based on current Brent prices, and run for a
year, though they can be renewed. They were allocated to just 28
companies, versus around 50 in 2012, the last time they were
awarded.
In a break with tradition, no contracts were given directly to
global trading houses Glencore Xstrata <GLEN.L>, Vitol <VITOLV.UL>,
Trafigura <TRAFGF.UL> or Gunvor, with only Switzerland's Mercuria
winning a contract, according to a list that four industry sources
verified as accurate.
The trading companies that missed out on direct oil contracts
declined to comment.
The list, released by the Nigeria National Petroleum Corporation (NNPC),
is preliminary and subject to revision. NNPC officials did not
immediately respond to requests for comment.
"It's incredible to have an OPEC member selling its oil this way.
There's one international trading house and barely any refiners on
the list," said a senior oil trading source who formerly bought
Nigerian crude oil.
Instead, several Nigerian oil companies featured on the annual list
for the first time, such as oil trading company Hyde Energy, oil and
gas firm Springfield, and Barbedos Group, a conglomerate that also
provides luxury aviation services.
Long-established Nigerian oil trading firms Taleveras and Aiteo were
also named on the list, which was circulated to winners last week.
Nigeria's policy has been to increase the role played by local
firms, both in operating oil blocks and trading, with the official
aim of ending decades of control over the business by foreign
majors.
However, several industry sources said the allocations favored
powerful businessmen close to President Goodluck Jonathan's
administration ahead of what are likely to be closely fought
presidential elections set for February next year.
SHARING THE PIE
Nigeria is one of a small group of major oil producers that
allocates its crude directly to trading houses, offering middlemen
an opportunity to make margins through reselling the crude.
Although many large trading houses were absent from the list, they
may have other ways of accessing the oil.
As in Nigeria's upstream sector, where Glencore recently submitted a
bid as part of a consortium of local companies for $3 billion in
energy assets, partnerships with domestic firms can help global
traders get a share of the business.
Vitol may have indirectly won a share of the Nigerian exports to
market via a Bermuda-based firm called Calson, in which it is a
minority shareholder.
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"It's not that the Swiss traders are being left out, it's that
they're forcing them to share their pie with the indigenous
companies," said an industry source in Nigeria.
Another way for traders to access oil is to buy the contract off a
winning firm at a premium.
A number of other former winners were also absent from the 2014/2015
list, which will take effect from June. China's Unipec, the trading
arm of top Asian refiner Sinopec Corp <600028.SS>, as well as Azeri
state oil company Socar, were former contract holders and did not
feature on the new list.
West African governments such as Ghana, Senegal, Burkina Faso,
Sierra Leone and Ivory Coast, which used to refine Nigerian oil in
domestic refineries, formerly had contracts that were not renewed,
according to the provisional list.
"BRIEFCASE TRADERS"
Non-governmental organizations, such as Switzerland's The Berne
Declaration, have criticized Nigeria's sales method, saying it is
opaque and offers no guarantee the oil is sold at fair value. The
government has repeatedly denied there is any lack of transparency
in the process.
London-based think-tank Chatham House estimated in a report on
Nigerian oil last year that local traders could score up to 40 cents
a barrel, amounting to around $5 million a year on 12 cargoes, just
by "flipping" the contract to a bigger trading company.
A 2012 study commissioned by Nigeria's Oil Minister Diezani Alison-Madueke
and headed up by former head of the anti-corruption agency Nuhu
Ribadu criticized the sales system whereby contracts were given to
"briefcase traders with little or no commercial or financial
capacity".
Diezani Alison-Madueke said at the time that there were no informal
contracts and everything was done on official tender, not by any
discretionary awards.
A portion of Nigerian oil is also sold via swap deals whereby crude
oil is given in exchange for imported fuels.
Producers operating in the West African country such as Italian oil
group Eni <ENI.MI> and oil major Royal Dutch Shell <RDSa.L> also
sell some oil directly or refine it themselves.
(Writing by Emma Farge; editing by Will Waterman)
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