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.
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