SELECTION OF BUYERS FOR STATE OWNED COMMODITY TRANSPARENCY

Presentation on theme: "SELECTION OF BUYERS FOR STATE OWNED COMMODITY TRANSPARENCY"— Presentation transcript:

1 SELECTION OF BUYERS FOR STATE OWNED COMMODITY TRANSPARENCY
Mele Kyari Group General Manager, Crude Oil Marketing Division

2 Sale of state owned commodity by SOE The NNPC Case: Agenda
Sale Options Key considerations NNPC Tender process Risk of corruption Pricing of Nigerian Crude Oil Major outcome of reforms

3 Our Watchword….. No Room for corruption in operations
Transparency and accountability has become our watch word Committed to improving reliability of supply

4 Competitive open tender Government to Government
Sale of state owned commodity by SOE The NNPC Case: Sale Options Competitive open tender Government to Government SPV to finance projects Production contract fiscal arrangement Long term end user Product supply arrangements

5 Sale of state owned commodity by SOE The NNPC Case: Key Considerations
Optimization of Pricing Market driven Transparent valuation Formula based Selection of Fit buyers Financial and trading capacity Advancement of local content Elimination of patronage Receipt of proceeds Establishment of payment instruments Validation of payments Supply stability Market perception Direct access to end buyer

6 Sale of state owned commodity by SOE The NNPC Case: Optimization of Pricing
Market driven Benchmark prices based on plats/argus… quotes Formula based Price= DBT +OSP OSP based on formula Pricing options determined 6 days ahead of loading dates and inplanted in LC Valuation subject to GRC check and bank validation

7 Sale of state owned commodity by SOE The NNPC Case: Selection of Fit buyers
Financial and trading capacity Ability to raise letters of credit Access to market and partnerships Capacity to manage lifting logistics Advancement of local content Inclusion agenda of Government supported by legislation Elimination of patronage

8 To promote local capacity development
Objectives of Tender To engage reputable qualified companies for the sale, purchase & lifting Nigerian crude grades. To ensure selection off-takers is aligned with tested transparent and accountable procedures. Compliance with the Public Procurement & Nigerian Content Acts To promote local capacity development

9 Selection of Offtakers
Sale of state owned commodity by SOE The NNPC Case: Selection of Fit buyers Advertisement Bid Evaluation Selection of Offtakers Contract Award Successful companies sign a contract for a period of twelve calendar months Bids evaluated against set criteria Financial Technical Local content Independent reports by NNPC evaluation team and Nigerian content board List of applicants that meet specified conditions are forwarded to NNPC Top Management for review NNPC places advert in the print media – Local & International Bids received are opened at a public session. Successful companies are advised through a formal letter from the Group General Manager, COMD Presence of relevant stakeholders, including EITI. NNPC management presents list of successful bidders for consideration and approval of the Minister of Petroleum

10 Sale of state owned commodity by SOE The NNPC Case: Risk of corruption
1 Pricing of products and Crude Oil Establishment of a determinate transparent pricing mechanism –OSP now computed on the basis of a template 2 Subsidy Schemes Execution Withdrawal of subsidy & associated price balancing mechanisms – work in progress 3 Selection of Buyers of Crude Oil & Products Open Market Tender with set criteria and basis of selection 4 Allocation of Available Oil Established framework of allocating available crude oil 5 Payment for Off-take Automation of payment system and appropriate security instrument. Existing for oil & gas liquids and being delivered for products 6 Quality & Quantity Valuations Engagement of world class quality & quantity assurance companies & automations

11 Sale of state owned commodity by SOE The NNPC Case: Key Outcomes of Reforms
Market stability associated with pricing reforms Entry of Nigerian entities into Crude oil trading Predictability of government revenue Curtailment of inappropriate arbitrages More room for reforms

12 Support for the Change Mantra of the
NNPC Resolve Ensure Prompt & Hassle Free Operations Enhancing Transparency and Accountability Optimization of Federation Revenue Key into anti-corruption fight of the Federal Government Sale to capable Buyers Support for the Change Mantra of the Federal Government !

13 THANK YOU THANK YOU

14 FRAUD Caution on fraudster activities in crude oil and gas allocation is strongly advised NNPC does not allocate or sell OFF OPEC quota NNPC does not participate in joint crude oil and gas allocation with any Company NNPC does not participate in spot allocation for now and is also not involved in cargo by cargo agreement NNPC 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 exercise

15 FRAUD Caution on fraudster activities in crude oil and gas allocation is strongly advised NNPC have been inundated with request to confirm documents for allocation of crude oil and gas Almost all the documents presented to NNPC for confirmation are not genuine or issued by NNPC People are therefore advised not to enter into any crude oil and gas sales agreement with any party on-behalf of NNPC If in doubt, contact NNPC-COMD for any Sales of NNPC/Government crude oil and gas equity