All offshore crude oil processing agreements and crude oil swap deals for refined petroleum products between the Nigerian National Petroleum Corporation, NNPC, and oil traders around the world have been cancelled by the Federal Government.
Presidential spokesperson, Femi Adesina, told Reuters news agency on Tuesday that President Muhammadu Buhari has given approval for the immediate cancellation of the agreements.
The Ahmed Joda-led Presidential Transition Committee had recommended to the Buhari administration to carry out a comprehensive audit of all Offshore Processing Agreements, OPAs, and Crude Oil Swap deals entered by the NNPC.
The committee had said the audit would help government identify and claim any reimbursements for excess crude oil lifted under the controversial OPA and Swap arrangements to establish the quantity of products delivered based on a fair and transparent audit process.
Apparently, acting on the committee’s recommendations, the Group Managing Director of the NNPC, Ibe Kachikwu, recently hinted that all Production Sharing Contracts, PSCs; Joint Venture Contract Agreements, JVCAs, and all other contracts between the NNPC and its various partners would be reviewed to reflect current day realities in the global oil and gas industry.
“Mr. President has approved the cancellation of the oil swap contracts. Mr. President has publicly expressed his displeasure over this oil swap deal,” Mr. Adesina said in response to enquiries by Reuters.
The deals, initiated by the Goodluck Jonathan administration, were designed to supply petroleum products for crude oil refining to cushion the negative impact of continued reliance on imports domestic consumption.
However, a source close to the NNPC, who pleaded anonymity as he was not authorised to speak on the issue, said the cancellation affected contracts for more than half of the 445,000 barrels per day of crude normally allocated for domestic refining usually used under the products swaps deals.
Although the source said government was not completely jettisoning the crude swap arrangements, he however explained that the main objective was to enable government review and re-evaluate the contracts in a way that would help restructure the terms to be more favourable to Nigerians.
Crude oil swap for refined petroleum products took a controversial connotation after concerned Nigerians like the former Governor of the Central Bank of Nigeria, Lamido Sanusi, and some regulatory agencies, majorly the Nigeria Extractive Industries Transparency Initiative (NEITI) criticised the deals as lacking transparency and accountability.