Nigeria to engage refiners directly after cancelling OPA bidding process

THE Nigeria National Petroleum Corporation (NNPC) has cancelled the bidding process for the 2016 round of offshore processing agreement (OPA). To replace the OPAs, NNPC will now sell crude oil directly to refiners and purchase refined products in return.
This follows the review of all 44 bids received by the company for the 2016 OPAs. None of the 44 companies directly owns a refinery, thereby creating a middleman system that the state-owned corporation wants to do away with. From January to August 2015, NNPC allocated 60.54 million barrels of crude for the offshore processing agreement translating to 249,144bpd. After the change of administration the new Nigeria government cancelled the existing OPAs that allocated 210,000bpd to three companies.
The OPAs were replaced by a new one by the new NNPC head to cover for the shortfall in domestic production following closure of the refineries. However, the new structure will involve NNPC selling crude oil directly to different refineries and using the proceeds to purchase refined products directly.
Analysts believe the new measure offers the country better value for money. ‘We expect the NNPC to either open another bidding process exclusively for refiners or directly negotiate with several refiners, picking the most cost-effective choice. This could offer the country more value for its money than the OPA contracts,’ Ecobank commented in a note.

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