FG Saves $1b Annually From Review Of Crude Swap, OPA Contracts | Independent Newspapers Limited
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FG Saves $1b Annually From Review Of Crude Swap, OPA Contracts

Ibe Kachukwu
Posted: Jul 12, 2016 at 5:06 pm   /   by   /   comments (0)

Charles Okonji

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has disclosed that the review of crude-for-products exchange arrangement, which is popularly referred to as crude swap, and Offshore Processing Arrangement (OPA) had saved the Federal Government over $1billion annually.

The crude swap and OPA, which were replaced with a Direct-Sale–Direct-Purchase (DSDP) arrangement, were terminated in March, this year, while DSDP was introduced to entrench transparency into the crude oil for product transaction.

Under the old order, crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern, but the DSDP option eliminated all the cost elements of middlemen and gave the NNPC the latitude to take control of sale and purchase of the crude oil transaction with its partners.

The DSDP initiative, it was gathered, also whittled down the influence of the Minister of Petroleum in the selection of bid winners, as it allowed all the bidders to be assessed transparently based on their global and national track record of performance before the selection of the best companies with the requisite capacities.

Aside reducing the gaps inherent in the OPA and the losses incurred by the NNPC in the past, the DSDP initiative equally gave other government agencies such as the Bureau of Public Procurement (BPP) and Nigeria Extractive Industries Transparency Initiative (NEITI) the opportunity to be a part of the bidding process in order to engender adherence to due process.

Kachikwu, who listed other achievements recorded in the last eleven months under his leadership at the Nigerian National Petroleum Corporation (NNPC), stated that he ensured that here was sanitization of the fuel supply and distribution matrix due to the introduction of the downstream liberalization regime.

According to him, NNPC, under his leadership, was able to reduce upstream contracting period to nine months from initial upwards of two years and the redirection of the NNPC on the path of profitability as witnessed in the May 2016 NNPC Monthly financial report, which posted a profit of N274 million.

The Minister of State for Petroleum Resources, who made this disclosure during the handover ceremony for the new Group Managing Director of NNPC, Dr. Maikanti Kacalla Baru, added other achievements under his leadership of NNPC to include prompt remittance of oil proceeds to the Federation Accounts, monthly publication of NNPC Financial reports.

He also informed that under his watch $80 billion Memorandum of Understanding (MoU) with Chinese investors was recently secured.

Baru, while pledging to continue with the ongoing comprehensive restructuring exercise of the NNPC, which he said has become inevitable, promised to exploit the immense experience of NNPC staff to maximize output in the ongoing restructuring exercise.

The new Group Managing Director of NNPC said: “Engagement of staff in major restructuring exercise is a key success factor that I will pay attention to while continuing with the restructuring effort.”

He unfolded his 12-point agenda to include: Creating an all-inclusive internal advisory council on security comprising representatives from NNPC, the IOCs, the unions and security operatives to brainstorm and address host community agitations to complement efforts of the Government Security Team.

Others include implementing the new business models and grant the needed autonomy to the strategic business units and autonomous business units; providing relevant directions and control that would ensure their growth and profitability, continuing to explore ways of relieving Government from the burden of cash calls obligation as well as address and defray the agreed cash call arrears of the IOCs and restore oil and gas production and grow the reserve portfolio.

Other areas Baru promised to focus on were Increasing crude oil production by the Nigerian Petroleum Development Company (NPDC), reviewing all weak contractual agreements and terminate bad ones as appropriate, leveraging on equity positions to cause the development of key gas assets for both domestic and export as well as pursuing the expansion of gas network across the country, repairing and restoring oil and gas pipeline infrastructure as well as providing robust security system for both detection and deterrent in conjunction with the existing security arrangement.

He also promised to improve refining efficiency of the four existing refineries to pave the way for future expansion, pursue diversification of businesses by refocusing on the implementation of Renewable Energy Programmes and Frontier Exploration Services, continue with the drive to make the venture businesses profitable and ensure service delivery, entrench the culture of professionalism by doing the right things at all times through transparency, accountability, and respect for all, ensure adequate staff welfare and motivation, training and capacity building.