EXCLUSIVE: Despite claiming to have ended DSDP, NNPC swapped $755m crude in November 2023

The Nigerian National Petroleum Company (NNPC) Limited swapped 9 million barrels of oil, valued at $755.74 million under its direct sale, direct purchase arrangement (DSDP) in November 2023, TheCable can report. 

In June 2023, the NNPC had said it commenced the termination of crude oil swap contracts and would pay cash for petrol imports.

The development followed the removal of the subsidy in May 2023, with petrol prices going above N500 a litre as against the subsidised N185.

“In the last four months, we practically terminated all direct sale direct purchase (DSDP) contracts. And we now have an arm’s-length process where we can pay cash for the imports,” Mele Kyari, NNPC’s group chief executive officer (GCEO), had said.

In an update on October 14, 2023, Kyari told international media that the national oil firm had started purchasing petrol via cash tenders, rather than oil swaps.

However, NNPC’s data published on January 18, 2024 showed that the DSDP arrangement was still in place as at November 2023.

A breakdown of the transaction revealed that the “DSDP project yield crude oil liftings” gulped a total of 1.85 million barrels, valued at $159.24 million in November last year.

The document also showed that NNPC used 6.66 million barrels (valued at $550.13 million) for its “DSDP PPSA crude oil liftings” deal in the same month.

It also said a total of 516,235 barrels was used for the “Federal Inland Revenue Service (FIRS) DSDP crude oil liftings”. The deal was worth $46.35 million — bringing the total value of the transactions to $755.74 million.

According to the data, NNPC’s customers (clients) in the oil swap deals were the Gulf Transport and Trading, AA Rano Nigeria, PV Oil Singapore PTE Limited, Oando Plc, Sahara Energy Resources, Mercuria, Mocoh SA, and Oando DMCC.

There is a possibility that this arrangement might be responsible for why petrol prices have remained stable since the subsidy removal, despite high crude oil prices and surging exchange rates in the black and official markets.

WHAT IS DSDP?

The DSDP is an agreement that allows the sale of crude oil to refiners, who will in turn supply NNPC with an equivalent worth of petroleum products.

The arrangement is a strategy by NNPC to ensure a sustained supply of petroleum products — petrol, diesel, and kerosene — in the country.

In 2015, NNPC ended its offshore processing arrangement (OPA) in favour of DSDP, and in 2016, it entered into its first DSDP contracts.

Although the company did not state the reasons for “halting” the programme last year, the NNPC reportedly owed $3 billion to trading houses and oil majors for crude oil swap arrangements as at June 2023.

EITI’S CONCERNS ON TRANSPARENCY

Meanwhile, the latest discovery that swap deals were done in November after a declared cessation comes at a time when there is growing demand for transparency in the company’s activities.

On November 30, 2023, the Extractive Industries Transparency Initiative (EITI) warned that Nigeria may be suspended if it fails to meet transparency standards.

More recently, the international organisation demanded clarification from the NNPC over its 20 percent equity in the Dangote Petroleum Refinery.

“NNPCL has acquired 20 percent equity interest in the Dangote refinery. However, it has not explained what is the valuation of the equity interest in the Dangote refinery. So the key factor here is accountability,” Alex Gordy, EITI technical director, had said.

Commenting on the development, Jide Pratt, a downstream operator, said the DSDP arrangement has been stopped but there has not been a lot of information on when it became effective.

However, he said the national oil company’s $3.3 billion emergency crude repayment loan, arranged by Afreximbank, mandates the NNPC to swap crude to guarantee payments.

Nigeria had pledged a total of 164.25 million barrels of crude oil — at 90,000 barrels per day (bpd) — starting from 2024 to repay the loan through Project Gazelle.

“The notion is that this continued for a while and might still be on as some forward sales where (sis) done so as to get some liquidity into the system,” he said.

Pratt added that “some more forward sales scenarios are in place yet again for the Afreximbank-NNPC transaction, which would mean using future lifting as a guarantee for payments”.

‘CRUDE SWAP ARRANGEMENT REMAINS DISCONTINUED’

Speaking on the issue, Femi Soneye, NNPC’s spokesperson, insisted that the DSDP programme had been stopped.

“We confirm that the crude swap arrangement has been discontinued, and our gasoline procurement process is solely on cash transactions,” he told TheCable.

“There is no substantiated evidence to suggest that a crude swap arrangement occurred in November 2023.”

Soneye said NNPC’s commitment to maintaining consistency “in our oil swap policy remains unwavering, with no deviations observed”.

Reminded that the information was sourced from the company’s website, he stood by his response.