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Subsidy: Stakeholders Want Buhari To Retain Crude Oil Swap

As the federal government concludes plans to remove oil subsidy, pressure is mounting on President Muhammadu Buhari to retain the crude oil swap arrangement in order to save cost.

The crude oil swap deal in lieu of subsidy may however be guided by tighter regulations and control.

However, security agencies have fingered some international oil companies (IOCs) in the controversial oil swap deal currently   being investigated.

The development has caused experts and stakeholders in the industry to ask for a comprehensive investigation to avoid “making local oil firms scapegoats of a policy of former President Goodluck Jonathan.”

A highly placed source said: “It is apparent that the federal government may withdraw petroleum subsidy based on the report of the Ahmed Joda Transition Committee.

“The development has put pressure on President Buhari to retain the oil swap arrangement to save cost in the light of the falling oil price in the international market. Some experts and stakeholders are behind the latest pressure.

“Recently the Independent Petroleum Marketers Association of Nigeria (IPMAN) said that oil swap is a better option for government to end scarcity and keep off subsidy payment. IPMAN also presented its association to government to partake and handle this oil swap arrangement.”

He, however, noted that the Buhari administration was leaving all options open until the ongoing investigation into the oil swap deal by the immediate past administration of ex-President Jonathan was concluded.

Another source said the oil swap arrangement was not new to the country, having been adopted between 1977 and 1986.

Quoting a document, the second source added: “Crude swap/offshore processing arrangements have been a federal government initiative since 1977 in partnership with international oil companies.

“Nigerians must know that the supposed interim policy of the NNPC to bridge the gap between petroleum products demand and supply was initiated over three decades ago between 1977 and 1986 when Nigeria needed heavy crude from Venezuela to feed the recently opened Kaduna refinery. We as a nation swapped Venezuela heavy crude for Nigeria’s light crude. The scope of crude swap was later broadened specifically because our refineries began to produce below their stipulated name plate capacity.”

Meanwhile, there are indications that security agencies are looking into the involvement of some IOCs in the oil swap deal.

It was learnt that the agencies made the discovery in some of the presentations made by those currently under probe.

One of the documents reads in part: “The ongoing investigation of oil swap agreement is incomplete without looking at the involvement of some IOCs. The probe should be holistic.

“It is very curious to see all of these negative reports and also the exclusion of the names of foreign and international companies that have for many years taken part in these swap and offshore processing contracts absent from all of these news items and reports.

“When foreigners (multinationals) were handling crude swap and delivering Petroleum Products on Open Account for Nigeria, our government was buying refined products at PLATTS plus $136-180/metric tonne from these multinationals. The government was equally required to pay interest to the multinationals on delayed receivables. The government incurred the cost of logistics and handling unlike the arrangement where we have local players participating…

“But local companies sell at PLATTS plus $82/metric tonne and the government does not pay interest on delayed receivables.

“These foreign companies create wealth and employment for their countries, why can’t Nigeria do the same with its own people and companies? Instead, Nigerians let envy get their better part by fighting their very own.”

The offshore processing agreement entails the allocation of crude oil by NNPC for processing in a refinery, depending on the crude type and yield pattern, resulting in refined petroleum products, mainly gasoline and kerosene, delivered by the contract operators into the country.

The by-products not required are paid in cash to NNPC. A refining fee is paid for this refining. The contract operator presents a letter of credit from a bank before it is allowed to lift the crude, as a form of security.

The SWAP is a very straightforward arrangement, which simply means you load the crude oil and you deliver refined petroleum products on a value-to-value based contract.


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