Mele Kyari Group General Manager Crude Oil Marketing Division Sale Options Key considerations NNPC Tender process Risk of corruption Pricing of Nigerian Crude Oil Major outcome of reforms Sale of state owned commodity by SOE ID: 1021997
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1. SELECTION OF BUYERS FOR STATE OWNED COMMODITY TRANSPARENCY Mele KyariGroup General Manager, Crude Oil Marketing Division
2. Sale OptionsKey considerationsNNPC Tender processRisk of corruptionPricing of Nigerian Crude OilMajor outcome of reformsSale of state owned commodity by SOEThe NNPC Case: Agenda
3. 3No Room for corruption in operationsOur Watchword…..Transparency and accountability has become our watch wordCommitted to improving reliability of supply
4. Competitive open tenderGovernment to GovernmentSPV to finance projectsProduction contract fiscal arrangementLong term end userProduct supply arrangementsSale of state owned commodity by SOEThe NNPC Case: Sale Options
5. 5Optimization of PricingMarket drivenTransparent valuationFormula basedSale of state owned commodity by SOEThe NNPC Case: Key ConsiderationsSelection of Fit buyersFinancial and trading capacityAdvancement of local contentElimination of patronageReceipt of proceedsEstablishment of payment instrumentsValidation of paymentsSupply stabilityMarket perceptionDirect access to end buyer
6. 6Market drivenBenchmark prices based on plats/argus… quotesFormula basedPrice= DBT +OSPOSP based on formulaPricing options determined 6 days ahead of loading dates and inplanted in LCValuation subject to GRC check and bank validationSale of state owned commodity by SOEThe NNPC Case: Optimization of Pricing
7. 7Sale of state owned commodity by SOEThe NNPC Case: Selection of Fit buyersFinancial and trading capacityAbility to raise letters of creditAccess to market and partnershipsCapacity to manage lifting logisticsAdvancement of local contentInclusion agenda of Government supported by legislationElimination of patronage
8. To engage reputable qualified companies for the sale, purchase & lifting Nigerian crude grades.Objectives of Tender To promote local capacity developmentTo ensure selection off-takers is aligned with tested transparent and accountable procedures.Compliance with the Public Procurement & Nigerian Content Acts
9. Bids received are opened at a public session.NNPC places advert in the print media – Local & International List of applicants that meet specified conditions are forwarded to NNPC Top Management for reviewSuccessful companies sign a contract for a period of twelve calendar monthsNNPC management presents list of successful bidders for consideration and approval of the Minister of PetroleumContract AwardBid EvaluationAdvertisementSuccessful companies are advised through a formal letter from the Group General Manager, COMDSelection of OfftakersPresence of relevant stakeholders, including EITI.Bids evaluated against set criteria FinancialTechnicalLocal contentIndependent reports by NNPC evaluation team and Nigerian content boardSale of state owned commodity by SOEThe NNPC Case: Selection of Fit buyers
10. 10Sale of state owned commodity by SOEThe NNPC Case: Risk of corruption1Pricing of products and Crude OilEstablishment of a determinate transparent pricing mechanism –OSP now computed on the basis of a template2Subsidy Schemes ExecutionWithdrawal of subsidy & associated price balancing mechanisms – work in progress3Selection of Buyers of Crude Oil & ProductsOpen Market Tender with set criteria and basis of selection4Allocation of Available OilEstablished framework of allocating available crude oil5Payment for Off-takeAutomation of payment system and appropriate security instrument. Existing for oil & gas liquids and being delivered for products6Quality & Quantity ValuationsEngagement of world class quality & quantity assurance companies & automations
11. 11Sale of state owned commodity by SOEThe NNPC Case: Key Outcomes of ReformsMarket stability associated with pricing reformsEntry of Nigerian entities into Crude oil tradingPredictability of government revenueCurtailment of inappropriate arbitragesMore room for reforms
12. 12NNPC ResolveSale to capable BuyersEnsure Prompt & Hassle Free Operations Enhancing Transparency and Accountability Optimization of Federation RevenueKey into anti-corruption fight of the Federal GovernmentSupport for the Change Mantra of the Federal Government !
13. THANK YOUTHANK YOU
14. 14Caution on fraudster activities in crude oil and gas allocation is strongly advisedNNPC does not allocate or sell OFF OPEC quota NNPC does not participate in joint crude oil and gas allocation with any CompanyNNPC does not participate in spot allocation for now and is also not involved in cargo by cargo agreementNNPC does not have any agent or intermediaries for Crude Oil and Gas sales or allocation. NNPC deals directly with only Offtakers that have successfully participated in the bid exerciseFRAUD
15. 15NNPC have been inundated with request to confirm documents for allocation of crude oil and gasCaution on fraudster activities in crude oil and gas allocation is strongly advisedIf in doubt, contact NNPC-COMD for any Sales of NNPC/Government crude oil and gas equityAlmost all the documents presented to NNPC for confirmation are not genuine or issued by NNPCPeople are therefore advised not to enter into any crude oil and gas sales agreement with any party on-behalf of NNPCFRAUD