Barely
one month after the Minister of State for Petroleum, Dr. Ibe Kachikwu,
negotiated a $15 billion crude-for-cash swap deal with India that would see the
Indian government making an upfront payment to Nigeria for crude purchases, Indian
refiners have indicated interest in increasing Nigerian crude imports from nine
million metric tonnes in 2016 (MMTPA) to 11 million metric tonnes in 2017.
By
the terms of the deal, which are yet to be agreed, the $15 billion would be
repaid on the basis of firm term crude contracts over some years and in
consideration for Indian public sector (PSU) companies collaborating in the
refining sector.
Other
methods of repayment include: exploration and production activities on a
government-to-government basis by Indian PSU companies, and long-term contracts
for the supply of crude to Indian PSU companies from Nigeria.
Successful
bidders for Nigeria’s crude oil term lifting contracts for 2017 will emerge by
the middle of this month.
Indian
refiners such as Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and
Hindustan Petroleum Corp Ltd (HPCL) currently have crude oil lifting contracts
for 2016 with the Nigerian National Petroleum Corporation (NNPC).
However,
NNPC’s Group Executive Director, Refineries, Anibor Kragha, told S&P Global
Platts in an interview on the sidelines of the Petrotech conference in New
Delhi on Monday that the Indian state-run refiners were pushing for an increase
in crude oil allocations from Nigeria.
“Three
Indian companies said that they were looking for a combined total of 11 million
metric tonnes in 2017 from nine million mt this year,” Kragha said.
About
seven barrels of crude make one metric ton.
“Now
what they will get is a balance between term contracts and (spot) sales contracts,”
he added.
“We
just came out of a meeting with key Indian oil companies and they are pushing
to get incremental allocations for the term contracts. We explained to them
that there needs to be a balance.
“Once
Nigerian output recovers, it will increasingly look towards India as the major
buyer of its crude. Indian demand is very positive for us. A vibrant Indian
economy is good for us,” Kragha explained.
Under
the crude term contracts, Nigeria exports around 1.17 million bpd of Nigerian
crude, out of the 2.2 million bpd production that is sold by contract holders
to end-users, refiners and other buyers.
The
country’s production dropped in recent months to a 20-year low as a result of
renewed militancy in the Niger Delta.
However,
Kachikwu also told journalists on the sidelines of the New Delhi conference
that the total production was around 1.9 million bpd, including 300,000 bpd of
condensates.
Kragha
said negotiations were ongoing and that if the deal is successful and Nigerian
output recovers, the country would “increasingly look towards India” as the
major buyer of its crude.
“Indian
demand is very positive for us. A vibrant Indian economy is good for us,” he
added.
In
2015-16, India imported nearly 23.7 million metric tonnes of crude (nearly 12
per cent of India’s overall imports) and over 2MMTPA of LNG from Nigeria.
Following
the $15 billion negotiation, the two countries agreed to work on a Memorandum
of Understanding (MoU) to facilitate investments by India in the Nigerian oil
and gas sector; specifically in areas such as the term contracts, participation
of Indian companies in the refining sector, oil and gas marketing, upstream
ventures, the development of gas infrastructure, and in the training of oil and
gas personnel in Nigeria.
The
MoU is expected to be firmed up this month during PETROTECH-2016.
According
to a source from an Indian refiner, “Nigerian crude is a must have for most of
our refineries, especially the older ones, which have been designed to run
light sweet crude.
“Despite
all the militancy issues, we still buy Nigerian crude, as our refineries need
it. We will continue to buy Nigerian crude, but we want them to supply us with
more,” he said.
India,
which is one of the world’s fastest growing economies, has seen its gasoline and
gasoil demand climb sharply over the past few years.
This
has encouraged Indian refineries to buy more Nigerian crude.
Source:Thisday
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