Nigeria shores up fuel needs ahead of 2019 election with BP deal
LONDON, Nov 1 (Reuters) - Nigeria's state oil firm NNPC said on Thursday that it had signed a crude-for-product deal with BP for the next six months to help meet the country's gasoline needs over the holidays and ahead of its general election early next year. Despite being Africa's biggest oil producer and an OPEC member, Nigeria is almost wholly reliant on fuel imports as its refineries barely function after years of neglect and infrastructure sabotage. Periodic fuel shortages are common with cars lining up at the pump sometimes for days, especially during the Christmas period.
Incumbent President Muhammadu Buhari, whose popularity is already sagging, cannot afford to be seen as unable to meet the needs of Nigeria's 190-million population. It was not immediately clear what volume would be allocated to BP. NNPC already has 10 similar deals for a total of just over 300,000 barrels per day of crude out its close to 1.9 million bpd of production as of October.
NNPC initially announced on Twitter late on Wednesday without providing details. BP declined to comment. In its statement, NNPC said the arrangement with BP would account for 20 percent of the west African country's total gasoline needs. NNPC imports about 70 percent of Nigeria's fuel needs, mainly gasoline, via swap contracts known as Direct Sale Direct Purchase (DSDP). Foreign firms must pair up with a local company to deliver the products. NNPC said that BP will be partnered with Nigerian firm AYM Shafa. BP was not originally among the companies with whom NNPC signed DSDPs. "BP's partnership with AYM Shafa...makes it a perfect fit for our plans to ensure that there is adequate supply of products throughout the coming Yuletide and even beyond the election period," NNPC managing director Maikanti Baru said, adding that AYM Shafa has 150 retail outlets and depots. The existing contract holders that include trading houses Vitol, Trafigura, Mercuria and French oil major Total started in mid-2017.
NNPC extended the existing DSDP contracts to June 2019 but several trading sources in the consortiums have requested new price terms, sources with direct knowledge said. Higher oil prices this year have helped boost Nigeria's foreign exchange reserves, but the weakness in the country's currency against the U.S. dollar has forced the central bank to spend billions to keep the naira stable and prevent an unwelcome spike in its import bill. Nigeria has been using swaps for about 10 years. NNPC launched the DSDP model in 2016 and under it, NNPC sells crude oil to refiners or trading houses, who in return, supply mainly gasoline but also other petroleum products such as diesel.
(Reporting by Julia Payne, additional reporting by Paul Carsten in Abuja; Writing by Amanda Cooper; Editing by Alexandra Hudson)
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