The requirements for marketing crude oil in Nigeria. Who can buy crude oil, how to buy and who is authorized to sales crude oil in Nigeria. The Nigerian National Petroleum Corporation Ltd (NNPC Ltd) is the only government owned company that is in charge of Crude Oil Marketing in Nigeria.
Crude oil trading is primarily determined by contract. A joint operating agreement, or any other related agreement, prescribes the terms for the valuation, allocation, lifting and marketing of crude oil produced from a licensed area.
The sale of the Nigerian National Petroleum Corporation’s (NNPC) crude entitlements involves bids for crude oil sale and purchase term contracts by potential off-takers, which may be:
- refiners with retail outlets;
- trading subsidiaries of upstream companies operating in Nigeria;
- established large-volume crude traders; or
- indigenous companies engaged in the Nigerian downstream sector.
The NNPC sets pre-qualification requirements for prospective off-takers, including:
- the requirement to demonstrate significant annual turnover;
- the ability to establish significant lines of credit;
- compliance with the Nigerian Oil and Gas Industry Content Development Act; and
- commitment to develop other sectors of the economy.
Read: Permits & Certificates You Need Start Oil & Gas Business in Nigeria
The trading regime for gas in Nigeria is similar to the regime for crude oil, which is subject to domestic gas supply obligations imposed by the Ministry of Petroleum, pursuant to the National Domestic Gas Supply and Pricing Regulations. Operators are prohibited from exporting gas until they fulfil their domestic gas supply obligations.
Is oil and gas pricing regulated in your jurisdiction?
The price of the dominant Nigerian crude oil grade (Bonny Light) is benchmarked alongside other prominent marker crude oils, the price of which is determined by various factors, including:
- the global demand for crude oil;
- the cost of transportation; and
- the chemical characteristics of the crude oil.
The government, pursuant to the National Domestic Gas Supply and Pricing Policy, developed a gas pricing strategy for gas sales to the:
- strategic domestic sector (ie, the power sector);
- strategic industrial sector (ie, gas-based industries utilising gas as feedstock, such as fertilizer projects); and
- commercial sectors that use gas as fuel (eg, the cement and steel sectors).
The federal government revised the price of gas sold to the power sector to $2.5/million standard cubic feet with effect from 1 January 2015.
Read: Business Registration & Support Service
Requirements For Marketing Crude Oil
Those who wish to buy and sell Nigerian crude oil must demonstrate their commitment to the oil industry through allocation of adequate resources of capital, equipment and manpower to the general business of prospecting, exploration and production of crude oil. [Crude Oil Marketing]
Those eligible to apply
An upstream investor who has acquired an oil prospecting license and must have completed a minimum amount of work on the concession.
Who May Apply For Crude Oil License
- Local Refineries
- International Refineries
- Internationally recognized Oil & Gas traders
Who May Purchase Nigerian Crude Oil
A bonafide end user who owns a refinery and sales outlet.
An established and globally recognised large volume trader proof of its global network, its operations and volumes of crude oil handled in the last three years.
Read: Business Permit Registration
Other Conditions
All applicants must have a minimum annual turnover of at least $100million and net worth of not less than $40 million. Successful applicants must show commitment to the development of the Nigerian economy by investing any number of opportunities that abound either in the oil industry or gas sector. Successful companies will be required to post a $1 million performance bond through a first class Nigerian bank in addition to the regular crude oil contract provisions.
OIL FRAUDS
The Nigerian National Petroleum Corporation (NNPC) views with dismay and is constrained yet again to raise the alarm over the renewed spate of attempts by fraudsters to defraud some individuals and organizations through bogus lifting/importation of Nigerian crude/products.
The recent disingenuous efforts have included the forging of shipping documents and the impersonation of top NNPC officials by unscrupulous individuals who parade themselves as either agents or officials of NNPC and have reportedly extorted huge sums of money from unwary Nigerians and foreigners alike for dubious crude oil allocation papers.
The NNPC wishes to state categorically that it neither sells its crude oil through agents nor does it carry out any spot sales. It further wishes to emphasize that there is absolutely nothing like “Presidential”, “Task Force”, “Ministerial”, “Diplomatic” or any other form of special or privileged allocation, which can be peddled by hawkers or anyone. The NNPC has not given any mandate to any person or persons to negotiate the sale of Nigerian Crude oil on its behalf.
The general public is therefore hereby alerted and warned against having any dealings with these “agents” or “officials” or anyone claiming to have access to special allocation. Anybody who is therefore duped through any of these bogus schemes should have himself or herself to blame. NNPC is working with the Economic and Financial Crimes Commission (EFCC) to track down such fraudsters.
Source: NNPC
CONTACT NNPC FOR ENQUIRIES:
The Group General Manager
Crude Oil Marketing Division,
NNPC Towers, Herbert Macaulay Way,
Business District, Garki, Abuja.