Unreliable Nigeria fails to deliver IOC crude

Vol 8, PW 17 (17 Nov 04) Midstream & Downstream

Nigeria is testing Indian Oils patience.

Crude supplies that should have touched Indian shores in October are nowhere in sight. This crude is part of an understanding reached between IOC and Nigerian National Petroleum Corporation in August.

The first parcel of Nigerian crude may come only in January (next year), an IOC source tells us. We are not worried.

There are sufficient quantities of high-grade crude on the spot market. He adds that spot purchases are 5 cents per barrel cheaper than term contracts.

This bravado is not reflected in a letter written by IOCs general manager (international trade) GP Agarwal to the oil ministry on 28th October. Agarwal reveals that IOC is sending a team to Nigeria to negotiate a term contract exclusively for low-sulphur crude.

He also tells the ministry that IOC is ready to set up a liaison office in Nigeria to ensure the supply of the right grade of crude. We understand IOC was never satisfied with its August understanding with NNPC for the supply of 2m t/y through a term contract for delivery between October 2004 and September 2005.

Nigeria was only willing to supply high sulphur Brass River crude through a term contract. But IOC wanted Forcados, Bonny Light, Escravos or Qua Iboe.

Nigerias assurance that it will supply preferred grades on Best Endeavour Basis is not good enough for us, reveals a source. We want an assured and regular supply of low-sulphur crude.

Agarwal tells the ministry that IOC is diversifying its crude procurement sources to ensure regular supplies of low sulphur crude. During 2003-04 IOC signed a term contract with Brunei Shell Company for the supply of Seria Light and that for 2004-05 it has signed a term contract with Abu Dhabi National Oil Corporation for the supply of Murban crude.

Agarwal says this year IOC has bought high-sulphur Abu Safa and low sulphur Grissol, Djeno and EA for trial processing at its refineries.