As the federal government concludes plans to remove oil subsidy, pressure
is mounting on President Muhammadu Buhari to retain the crude oil swap
arrangement in order to save cost.
The crude oil swap deal in lieu of subsidy may however be guided by
tighter regulations and control.
However, security agencies have fingered some international oil companies
(IOCs) in the controversial oil swap deal currently being investigated.
The development has caused experts and stakeholders in the industry to ask
for a comprehensive investigation to avoid “making local oil firms
scapegoats of a policy of former President Goodluck Jonathan.”
A highly placed source said: “It is apparent that the federal government
may withdraw petroleum subsidy based on the report of the Ahmed Joda
Transition Committee.
“The development has put pressure on President Buhari to retain the oil
swap arrangement to save cost in the light of the falling oil price in the
international market. Some experts and stakeholders are behind the latest
pressure.
“Recently the Independent Petroleum Marketers Association of Nigeria
(IPMAN) said that oil swap is a better option for government to end
scarcity and keep off subsidy payment. IPMAN also presented its
association to government to partake and handle this oil swap
arrangement.”
He, however, noted that the Buhari administration was leaving all options
open until the ongoing investigation into the oil swap deal by the
immediate past administration of ex-President Jonathan was concluded.
Another source said the oil swap arrangement was not new to the country,
having been adopted between 1977 and 1986.
Quoting a document, the second source added: “Crude swap/offshore
processing arrangements have been a federal government initiative since
1977 in partnership with international oil companies.
“Nigerians must know that the supposed interim policy of the NNPC to
bridge the gap between petroleum products demand and supply was initiated
over three decades ago between 1977 and 1986 when Nigeria needed heavy
crude from Venezuela to feed the recently opened Kaduna refinery. We as a
nation swapped Venezuela heavy crude for Nigeria’s light crude. The scope
of crude swap was later broadened specifically because our refineries
began to produce below their stipulated name plate capacity.”
Meanwhile, there are indications that security agencies are looking into
the involvement of some IOCs in the oil swap deal.
It was learnt that the agencies made the discovery in some of the
presentations made by those currently under probe.
One of the documents reads in part: “The ongoing investigation of oil swap
agreement is incomplete without looking at the involvement of some IOCs.
The probe should be holistic.
“It is very curious to see all of these negative reports and also the
exclusion of the names of foreign and international companies that have
for many years taken part in these swap and offshore processing contracts
absent from all of these news items and reports.
“When foreigners (multinationals) were handling crude swap and delivering
Petroleum Products on Open Account for Nigeria, our government was buying
refined products at PLATTS plus $136-180/metric tonne from these
multinationals. The government was equally required to pay interest to the
multinationals on delayed receivables. The government incurred the cost of
logistics and handling unlike the arrangement where we have local players
participating…
“But local companies sell at PLATTS plus $82/metric tonne and the
government does not pay interest on delayed receivables.
“These foreign companies create wealth and employment for their countries,
why can’t Nigeria do the same with its own people and companies? Instead,
Nigerians let envy get their better part by fighting their very own.”
The offshore processing agreement entails the allocation of crude oil by
NNPC for processing in a refinery, depending on the crude type and yield
pattern, resulting in refined petroleum products, mainly gasoline and
kerosene, delivered by the contract operators into the country.
The by-products not required are paid in cash to NNPC. A refining fee is
paid for this refining. The contract operator presents a letter of credit
from a bank before it is allowed to lift the crude, as a form of security.
The SWAP is a very straightforward arrangement, which simply means you
load the crude oil and you deliver refined petroleum products on a
value-to-value based contract.