November 1, 2018 / 2:12 PM / a year ago

UPDATE 1-Nigeria shores up fuel needs ahead of 2019 election with BP deal

 (Adds background detail, NNPC statement, BP comment)
    By Julia Payne and Amanda Cooper
    LONDON, Nov 1 (Reuters) - Nigeria's state oil firm NNPC said
on Thursday that it had signed a crude-for-product deal with BP
 for the next six months to help meet the country's
gasoline needs over the holidays and ahead of its general
election early next year.
    Despite being Africa's biggest oil producer and an OPEC
member, Nigeria is almost wholly reliant on fuel imports as its
refineries barely function after years of neglect and
infrastructure sabotage.
    Periodic fuel shortages are common with cars lining up at
the pump sometimes for days, especially during the Christmas
    Incumbent President Muhammadu Buhari, whose popularity is
already sagging, cannot afford to be seen as unable to meet the
needs of Nigeria's 190-million population. 
    It was not immediately clear what volume would be allocated
to BP. NNPC already has 10 similar deals for a total of just
over 300,000 barrels per day of crude out its close to 1.9
million bpd of production as of October.
    NNPC initially announced on Twitter late on Wednesday
without providing details. BP declined to comment.
    In its statement, NNPC said the arrangement with BP would
account for 20 percent of the west African country's total
gasoline needs.  
    NNPC imports about 70 percent of Nigeria's fuel needs,
mainly gasoline, via swap contracts known as Direct Sale Direct
Purchase (DSDP). 
    Foreign firms must pair up with a local company to deliver
the products. NNPC said that BP will be partnered with Nigerian
firm AYM Shafa. 
    BP was not originally among the companies with whom NNPC
signed DSDPs. 
    "BP's partnership with AYM Shafa...makes it a perfect fit
for our plans to ensure that there is adequate supply of
products throughout the coming Yuletide and even beyond the
election period," NNPC managing director Maikanti Baru said,
adding that AYM Shafa has 150 retail outlets and depots.
    The existing contract holders that include trading houses
Vitol, Trafigura, Mercuria and French oil major Total 
started in mid-2017.
    NNPC extended the existing DSDP contracts to June 2019 but
several trading sources in the consortiums have requested new
price terms, sources with direct knowledge said.   
    Higher oil prices this year have helped boost Nigeria's
foreign exchange reserves, but the weakness in the country's
currency against the U.S. dollar has forced the central bank to
spend billions to keep the naira stable and prevent an unwelcome
spike in its import bill.
    Nigeria has been using swaps for about 10 years. NNPC
launched the DSDP model in 2016 and under it, NNPC sells crude
oil to refiners or trading houses, who in return, supply mainly
gasoline but also other petroleum products such as diesel. 
 Trader/Refin  Local partner(s)       Volume (minimum
 ery                                  expected)
 Trafigura     AA Rano                          33,000 bpd
 Petrocam      Rainoil/Falcon Crest             33,000 bpd
 Mocoh         Heyden                           33,000 bpd
 Cepsa         Oando                            33,000 bpd
 Sahara        SIR                              33,000 bpd
 Mercuria      Matrix/Rahmaniya                 33,000 bpd
 Socar         Hyde                             33,000 bpd
 Litasco       MRS                              33,000 bpd
 Vitol         Varo                             33,000 bpd
 Total         Total                            33,000 bpd
 10 Groupings                                  330,000 bpd

 (Reporting by Julia Payne, additional reporting by Paul Carsten
in Abuja; Writing by Amanda Cooper; Editing by Alexandra Hudson)
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