Six months more for OVL's Trafigura contract

Vol 7, PW 13 (10 Sep 03) Midstream & Downstream

ONGC Videsh has decided to extend its 'agency' agreement with Trafigura by another six months for the sale ofits share of crude from the Greater Nile Oil Project in Sudan.

If the agreement had not been extended its validity would have ended this month. Trafigura had been originally chosen by Talisman Energy (OVL's predecessor) to market its share of Nile Blend Crude produced from Sudan.

When OVL replaced Talisman, it kept Trafigura for six months to September because it didnt have any experience of international trading in oil. "Our marketing set up for international trading is yet to be developed," reveals a source.

OVL wants to continue with Trafigura for another six months because, "we get an outlook of the market even though most of our share (3m t/y) of Sudan crude is sold to (ONGC subsidiary) Mangalore Refineries. We can also learn the skills in international oil trading at a low cost." But OVL has attached a rider to its six-month extension of the Trafigura agreement: at the end of the fourth month in January 2004 OVL will decide whether to continue with Trafigura or not for the balance two months.

While Trafigura will have its contract extended, the logistics consultant for arranging shipments of OVL's share of Nile Blend Crude has not been so lucky. A source tells us OVL has decided to discontinue the services of Zulfiker Butt beyond mid-September.

Butt was originally hired by Talisman to organise shipping of Nile Blend Crude. Since this crude is very waxy and has a high 'pour' point only ships with heating capacity could be used.

"The availability of such ships had to be coordinated to precision. Besides, most of the Nile Blend Crude was being sold on a CFR (Cost Plus Freight) basis." OVL decided to retain Butt for six months after it took over from Talisman.

But with all of OVL's sales of Nile Blend Crude taking place on an FOB basis, there is no further need to charter tankers. In May, OVL assigned a senior logistics staff officer to work with and finally take over from the consultant mid-September onwards.