Friday, December 3, 2010

Nigeria signs two crude-for-product oil swap deals

By Emma Farge

LONDON (Reuters) - Nigeria has concluded two annual deals exchanging crude for oil products with commodities trader Trafigura and Ivorian refiner SIR that will cover nearly half of the west African country's fuel imports, trade sources said.

The two deals combined, worth around $3 billion, will cover nearly half monthly oil product imports, approximately 7-9 cargoes or around 300,000 tonnes.

Nigeria is Africa's top oil exporter but relies on imports for around 85 percent of its domestic oil products needs because its refineries are poorly maintained and have inadequate capacity.

Trafigura has agreed an annual contract with state-run Nigerian National Petroleum Corporation (NNPC) to buy 60,000 barrels per day (bpd) of crude oil in exchange for products such as gasoline and gas oil of the equivalent value.

This deal is worth around $2 billion, based on the current Brent crude oil price of $91 a barrel.

Trafigura's deliveries are likely to amount to around 5-6 standard size gasoline cargoes a month or around 200,000 tonnes following the deal, two traders said.

The contract took effect in October, they said.

NNPC also signed a contract to sell Ivorian refiner SIR 30,000 bpd of crude oil processed offshore, in exchange for oil products sourced from a refinery in the nearby Ivory Coast.

This amounts to between 2-3 gasoline cargoes a month.

"Nigeria needs three or four crude swap deals to cover their import requirements and then they will completely stop. These two cover almost half of import requirements," said a physical gasoline trader based in Lagos.

News of the supply contracts coincides with a decision by Nigerian fuels authority PPPRA to stop subsidising marketers buying fuels from Noble Group in a move likely to marginalise one of the country's top suppliers.

Typically, NNPC organises imports through quarterly tenders but ongoing delays in payments have prompted some suppliers to seek other ways of supplying Africa's most populous country.

NNPC has paid $2-$2.5 billion of fuel import debts but suppliers still face up to seven months beyond normal credit terms to receive other outstanding payments, trade sources told Reuters.

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