This post is a guild for all that have interest to trade or Purchase Crude Oil in/ from Nigeria. It covers the statutory requirements for both Nigerians and foreign companies, the available options to get Crude Oil, the different ways marketing company can sell and how to find genuine Crude Oil sellers in Nigeria. Contact us for your Oil and Gas Consulting Services in Nigeria.
Introduction
Buying crude oil from Nigeria can be relatively straight forward if the crude oil buyer can buy crude oil from a reliable or genuine crude oil seller or a crude oil broker from the OFF-OPEC market. The Nigerian National Petroleum Corporation (NNPC) is an OPEC registered national and it abides by its rules and regulations. Where a company has the interest to purchase crude oil in Nigeria, such company may approach NNPC for such transaction.
Read: History of Crude Oil in Nigeria
Who Can Apply to NNPC for Crude Oil Purchase?
- A bonafide end user who owns a refinery or retail outlet that can process Nigerian crude oil grades.
- Government to government arrangement.
- An established globally recognised large volume of crude oil trader.
- An indigenous Nigerian company engaged in the Nigerian oil and gas downstream business activities.
The duration of the term contract for the purchase shall be for 12 calendar months (1 year)
Statutory Requirements to Purchase Crude Oil in Nigeria
- Certificate of incorporation, which is the evidence of company registration issued by the corporate affairs commission (CAC) for Nigerian companies, and for foreign companies’ certificate of incorporation issued by the home country government agency.
- Certified true copies of the memorandum and article of association of the company, stating the statement of share capital and the return of allotment, CAC7 Particulars of Directors, and other statutory documents indicating ownership structure of the company.
- Detailed company profile demonstrating the company’s capability.
- A tender application letter on the bidder’s letterhead paper including the name of the authorised contact person, company full address, email address and telephone number should be submitted.
- Tax clearance certificate of the company for Nigeria company and similar tax certification document for foreign companies.
Read: Nigerian Local Content Policy
- Evidence of compliance with Industrial Training Fund (ITF) or ITF certificate or similar documents for the foreign company.
- Evidence of compliance with Nigerian social insurance trust fund (NSITF) or NSITF compliance certificate.
- Evidence of the company compliance with Pension or Pension certificate or similar documents for foreign companies.
- Evidence of compliance with Nigerian Upstream Petroleum Regulatory Commission (NUPRC) or (NMDPRA) where applicable.
- Audited account of the company for the past 3 years of application, which must bear the stamp of an audit firm.
- Demonstration of minimum annual turnover of USD500, 000,000 (or the naira equivalent) and net worth of not less than USD250, 000,000 or the naira equivalent for the recent fiscal year ending.
- Ability to establish an irrevocable letter of credit for the payment of any allocated crude oil subject to the contract terms.
- Details of the applicants’ facilities, market and volume of crude oil listed in barrels and the products traded listed in metre tonnes.
- Evidence of verifiable similar service carried out within the past 3 years.
Read: Oil & Gas Permits & Licensing in Nigeria
Others Requirements & Processes to Purchase Crude Oil
- A prospective bidder shall also make a sworn affidavit to support his application action as follows:
- To allow NNPC to verify all claims made in the application
- To allow NNPC to verify that the organisation is not in any form of insolvency, bankruptcy or receivership
- To confirm that the company is not a replacement for a hitherto tax defaulting company
- To confirm whether or not any of the members of relevant companies of NNPC or Bureau of public procurement has an interest in the company
- A written statement confirming that the company does not have any director who has been convicted in any country for a criminal offence, fraud etc
- A written statement providing full names, phone number, contact addresses of current directors and beneficial owners.
- A pres-signed undertaking to comply strictly with the Nigerian Anti-corruption laws in processing the bid and executing the contract when the application is granted.
After that, all the completed bids should be sealed and submitted in 2 envelopes clearly marked as one original copy and one electronic copy duly signed by the bidders authorised representative.
All bids shall then be publicly opened and endorsed following the deadline for submission in the presence of invited observers and prospective bidders.
The Different Ways to Get Crude Oil from Nigeria
1). Directly From the Nigerian National Petroleum Corporation (NNPC): The Nigerian National Petroleum Corporation (NNPC) is Nigeria’s oil & gas regulatory body, and is the organization that has the direct right to sell crude oil. The problem with going through the NNPC is they have very strict conditions, and so, most crude oil buyers prefer to go through companies who have been awarded crude oil allocations by the NNPC. Some of the conditions to secure an OPEC allocation are:
- A proof of fund spanning through $100,000,000.
- Will post an upfront SBLC before you even secure an allocation.
- Must own a local refinery or international refinery.
- And much more.
These conditions make refineries take the other route of using crude oil sellers.
2). OPEC Sellers: These are oil and gas companies in Nigeria that have the ability to lift crude oil from the NNPC because of the allocation allotted to them. They are required to sell off their allocations within a certain period and can be approached by crude oil buyers if they cannot meet the conditions set by the NNPC to buy directly from the corporation.
3). Independent OFF-OPEC Sellers: These are individuals or smaller businesses who have connections to the federal government to lift crude oil on Provisional Lifting Rights basis. They could make their purchase direct from the NNPC or the Production Sharing Contract holder.
4). A Loaded Vessel: A crude oil buyer can buy from a crude oil seller who already has a vessel loaded with crude oil. This usually happens when the crude oil seller’s previous crude oil buyer defaults, leaving them with crude oil already paid for. But 99.5% of loaded crude oil offers are scams.
Read: Oil and Gas Consulting Services in Nigeria
Different Ways to Sell Crude Oil from Nigeria.
There are four different ways to sell crude oil from Nigeria. They include:
1). Cost Insurance and Freight (CIF): Here, the crude oil seller will handle everything from loading the vessel and sending the crude oil to wherever the buyer wants it delivered. They buy from the NNPC on FOB terms and ship to the crude oil buyer on CIF terms.
2). Freight On Board (FOB): Here, the crude oil seller pays for the loading and clearance costs of the cargo, while the crude oil buyer pays the cost of marine freight transport, insurance, unloading, and transportation from the arrival port to the final destination. In this case, the crude oil buyer pays for the cargo before it sails out of Nigerian waters.
3). Tanker Take Over (TTO): Here, the crude oil buyer will take over the vessel, offload at their destination, and return it.
4). Tanker To Tanker (TTT): Here, the crude oil buyer uses their own vessel, then the oil is transshipped when the transaction is fully settled.
Read: How to Star Oil & Gas Business in Nigeria
How to Settle Crude Oil Transactions Payment
Payments are made through various means like wire transfers, bank to bank transfer, or any other agreed means of payment. The price of crude oil in Nigeria per barrel is usually what is listed on the OPEC’s website.
How To Find Genuine Crude Oil Sellers in Nigeria
- Genuine OPEC crude oil sellers in Nigeria are given allocations from the NNPC, which is the body that regulates the Nigerian petroleum industry. The first step to verify the authenticity of a crude oil seller then, is to ask to get their allocation details for verification. A failure to produce this can mean the crude oil seller is not a real OPEC seller. Besides, all OPEC crude oil sellers in Nigeria have their names published on the news yearly. OFF-OPEC crude oil sellers on the other hand are not registered but have the ability to lift crude on PLR basis. After the crude oil buyer has placed a financial instrument, any genuine OFF-OPEC seller would get a verifiable Laycan that shows they have a lifting schedule in place. Some of these crude oil sellers would be willing to post an upfront performance bond to give the crude oil buyer comfort.
You can use our service to verify a genuine OFF-OPEC in Nigeria. - Be wary of crude oil sellers asking for upfront payments. Many, if not all of them, are fraudulent and will make you lose your money faster than you’d realize.
- Ensure you speak with the crude oil seller over the phone to ask a series of questions. Replying emails is not enough. If possible, it is best for the crude oil buyers to get to eventually meet the crude oil seller in person. This is a whole lot safer than just remote conversations.
- Upon clearing the cargo, the seller should be able to provide the full verifiable cargo documents. If the documents sent are not verifiable, then you know there’s a problem already.