The Nigerian National Petroleum Corporation (NNPC) has unveiled plans to replace the controversial crude-for-products exchange arrangement popularly referred to as crude swap with Direct-Sale–Direct-Purchase (DSDP).
The Minister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation, Dr. Ibe Kachikwu, made the disclosure when he appeared before the House of Representatives Ad-Hoc Committee set up to investigate the Corporation’s offshore processing and crude swap arrangement for the period between 2010 to date.
The NNPC, had in August 2015, an-nounced the termination of the OPA, entered into in January, 2015 with three com-panies- Duke Oil Company Inc., Aiteo Energy Resources Limited and Sahara Energy Resources Nigeria Limited.
Under the agreement, NNPC allocates a total of 210, 000 barrels of crude oil per day for refining at offshore locations in exchange for pe-troleum products at pre-agreed yield pattern.
But Kachikwn had assured the House of Reps Members that DSDP, which is scheduled to take off by March, would save the country about $1 billion. He noted that the DSDP was adopted to replace the Crude Oil Swap initiative and the Offshore Processing Arrangement so as to introduce and entrench transparency into the crude oil for product transaction by the Corporation in line with global best practices.
Under the old order, crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern.
The Minister stated that the DSDP option eliminates all the cost elements of middlemen and gives the NNPC the latitude to take control of sale and purchase of the crude oil transaction with its partners, adding that the initiative would save one billion dollars for the Federal Government.
“When I assumed duty as the GMD of NNPC, I met the Offshore Processing Arrangement (OPA) and like you know there is always room for improvement. I and my team came up with the DSDP initiative with the aim of throwing open the bidding process. This initiative has brought transparency into the crude-for-product exchange matrix and it is in tandem with global best practices,” Kachikwu said.
According to him, the DSDP initiative whittles down the influence of the Minister in the selection of bid winners as it allows all the bidders to be assessed transparently based on their global and national track record of performance before the best companies with the requisite capacities are selected.
Shedding more light on the need for the introduction of the DSDP, Kachikwu noted that the policy is aimed at reducing the gaps inherent in the OPA and the losses incurred by the NNPC in the past.
He stated that the new arrangement would help the Corporation to grow indigenous capacity in the international crude oil business and generate employment opportunities for indigenous companies that are selected.
The Minister informed that the DSDP initiative gives other government agencies such as the Bureau of Public Procurement (BPP) and Nigeria Extractive Industry and Transparency Initiative (NEITI) the opportunity to be a part of the bidding process in order to engender adherence to due process.
Speaking on some of the reported misgivings by some Federal agencies over the alleged non-transparent nature of past crude-for-products exchange arrangements, the Minister assured that the reconciliation process was ongoing and that going forward the Ministry would deploy technology to track cargoes and transshipment at the reception depots in order to forestall any incidence of round tripping.
Kachikwu announced that the price modulation policy has rid the Federal Government of the burden of subsidy on imported petroleum products in January 2016.
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