Thursday, June 28, 2012

Nigerian black market oil traders offer huge discount to international traders

Criminals in the country’s oil sector, who claim to have privileged access to crude oil, are offering the commodity at huge discounts to interested traders.

Oil traders, however, view the deals as too good to be genuine, as documents from the criminals’ companies show that spot cargoes of several hundred thousand barrels of crude can be picked up at discounts of up to $10m.

Traders in the oil sector told Reuters that the documents were suspiciously flawed.

According to them, this indicates that financial crimes in the country have definitely hit the oil industry.

The obscure firms involved in the fraudulent activities include one United-Kingdom registered company purporting to be near the top of a sales chain in which oil cargoes can change hands up to half a dozen times before being refined.

Two of the firms said they were able to sell oil cheaply because of special access to the Nigerian National Petroleum Corporation’s contracts.

The NNPC, in a bid to warn oil marketers of scammers in the sector, had placed a “Scam Alert” on its website drawing attention to the “unsavoury characters purporting to be bona fide staff of the NNPC or contractors to NNPC or purchasers of Nigerian crude oil or contractors to the Nigerian government.”

Industry analysts said the difficulty faced by the present administration in making reforms during time of considerable doubt over who was responsible for selling oil was one factor enabling the fraudsters.

Though some measures were recently adopted to streamline the entry for participation in NNPC’s 2012-2013 term allocations, the results have not appeared since the initial tender document was released in March.

Five written offers from some of the firms showed a close resemblance to official paperwork circulated among traders, including documents attributed to NNPC, stamps from terminal operators and shipping lists with vessels and loading dates.

“They are full of imagination,” a West African oil trader told Reuters, while commenting on the document.

Another oil trader with a London-based oil firm suspected that some of the offers were attempts to resell the oil siphoned off by thieves in the Niger Delta, since the majority of offers were for the local grade Bonny Light.

“A lot of this oil on the side may be bunkered (stolen) and does go to people in the Delta to sell. It is a side business and I think some buyers are doing good business there,” the source, who preferred not to be named, said.

Nigeria’s oil is sold by equity holders including oil majors Total and Royal Dutch Shell, which have a stake in production and via term contracts handed mostly to oil trading firms.

The large number of companies involved in selling oil via term contracts means it can be tough for even experienced traders to tell the difference between real and fake offers.

Industry sources said the number of companies selling Nigeria’s oil increased dramatically after Jonathan’s election as part of a strategy to broaden local participation in the country’s oil sector.

But critics point to this as an example of the cronyism that is helping to buttress support for Nigeria’s political elite.

“It will be interesting to see whether the issuing of the latest crude tender to include Nigerian companies is a return to the political patronage of the past dressed up as increasing Nigerian content,” said an oil industry consulting source in Nigeria.


Related stories: Nigeria loses $20bn in oil theft yearly

Nigeria number 1 in crude oil theft 

No comments:

Post a Comment