NIGERIA - Nigerian Pricing & Marketing.

NNPC's marketing division gives traders options to take advantage of advanced and deferred crude oil prices. Traders exercising such options have to pay relevant premia which allow them to gain from price changes before or after the loading date. It also gives them a pricing window before or after the loading date. But the traders are no longer as emthusiastic about the exercise as they were when NNPC introduced the premia in 2000.

NNPC's external oil marketing strategy was changed as soon as Jackson Gaius-Obaseki took over as the company's CEO in early June 1999. He was appointed to this post by President Obasanjo, who immediately after his coming to office in late May decided on measures to end corruption and cancel contracts signed under his military predecessor, Gen. Abdulsalami Abubakar. Until then, Obaseki was head of NNPC's oil marketing division; but in that post he was a mere figurehead and could not block sales deals arranged by or on behalf of the military. Empowered by Obasanjo, Obaseki in June 1999 ordered the cancellation of all annual contracts for crudes and fuel oil, giving the companies concerned a 90-day notice period stipulated in the agreements. Said to total 41 contracts, these expired in September 1999. New terms have since been applied.

New NNPC regulations limited prospective buyers of crudes and fuel oil to three categories:

1. End-users "who own a refinery and outlets abroad".

2. Companies which are "established and globally recognised large volume traders".

3. A "company that has built an export oil refinery in Nigeria". This category is for companies which are yet to build export oil refining ventures in the country. At present all the refineries in Nigeria are fully owned by NNPC. NNPC's downstream operations are to be privatised.

The companies in these categories must have a minimum annual turnover of $100m and net worth of not less than $40m. They must also "show commitment to the Nigerian economy" either by investing in commodity development or by taking up investment opportunities in the oil, gas and other sectors.

Term lifters are led by foreign oil companies operating E&P joint ventures with NNPC, such as Shell, ExxonMobil, ChevronTexaco, Agip, Total, and some PSA operators who include Nigerian firms. Each of these companies is marketing its equity share of production in accordance with the fiscal terms of their JV agreements or PSAs. Term lifters also include oil trading companies like Vitol, Glencore, Arcadia, Attock Oil and Trafigura.

Where this nation's economy is concerned, the role of the foreign E&P partners in marketing Nigerian oil exports is the most important. These firms have the export terminals, as part of their JVs with NNPC, and their own integrated systems have all the other logistics required.

The US oil market is of primary importance to Nigeria, for both political and economic reasons. NNPC's American partners, including the biggest oil companies in the US, are good lobbyists for Abuja in Washington.

Shell's crude oils are blended into three export grades: Bonny Light, 37.6o API with 0.13% sulphur, a gasoline-rich blend also known as Nigerian Light; Bonny Medium (or Nigerian Medium) 25.7o API with 0.24% sulphur, which is rich in gasoline and gasoil; and Forcados, 30.5o API with 0.2% sulphur, which is particularly rich in gasoil. The three blends are popular among European, US and Asian refiners.

Shell has two terminals: Bonny Island, which is 40 years old, and Forcados. Shell is upgrading and expanding Bonny and Hyundai of South Korea is doing the work under a $480m turnkey contract. When complete in 2006, the project will enable Shell to export 1.5m b/d from Bonny.

ExxonMobil's crude oils are blended into Qua Iboe, 37o API with 0.1% sulphur. Its Oso condensate is a far lighter, almost sulphur-free liquid. Both are exported from ExxonMobil's Qua Iboe terminal.

Chevron's blend is Escravos, 36o API with 0.2% sulphur. This is shipped by SBM from the Escravos terminal on the mouth of the Niger Delta. The terminal has been partly improved.

Agip has a popular blend, Brass River, 43o API with 0.1% sulphur. This is shipped from the Brass River terminal in the Niger Delta. The blend is priced at a higher premium over Brent than in the case of Bonny Light.

Total's JV has a variety of crude oils, mostly of the Bonny Medium type, but include the Odudu grade similar to Bonny Light. The French major exports from the offshore Odudu terminal, close to Qua Iboe and Oso.

Texaco's blend is Pennington, 38o API with 0.1% sulphur. It is shipped from the Pennington terminal on its Apoi offshore platform.

Among the producers under PSAs, Agip exports its share of an offshore venture separate from its Brass River JV with NNPC. A joint blend of crudes is exported by Addax, a Swiss-based firm operating fields sold by Ashland, and Monipulo Petroleum which is a small local firm producing oil from an offshore platform near Antan of Addax.