The Nigerian National Petroleum Company (NNPC) has denied engaging in fraudulent price fixing of petroleum products with Swiss oil traders, Vitol and Trafigura.
Group Managing Director of the NNPC, Andrew Yakubu, testifying before the House of Representatives Committee on Petroleum Resources stated that pricing was not set arbitrarily but based on international best practices in the oil industry.
Yakubu said: “The prices of oil were determined by Platts. Honourable Chairman, we affirm that the claims by the “Bernes Declaration” are baseless and without material substance and request you to set it aside in its entirety.
“We submit that our pricing strategy is aligned to international best practice in the industry. Our prices are based on a reference to the benchmark of crude Brent whose prices are published by Platts for the international trading community, a premium/ differential for individual crude grades and the selection of an option.
“Average of five consecutive day publications by Platts provides about 97 per cent of the value of any of our crude blends with differential/premium account for about three per cent of the total value.
“The differential/premium are established based on a wide range of publications (Platts, Argus, LOR, etc) and internal market assessment by the Corporation for all crude grades.”
He added: “The NNPC Act mandates the Corporation to supply petroleum products to the Federation as supplier of last resort. In order to meet this obligation, 445,000 barrels of crude oil is assigned to the Corporation at international price for domestic refining.
“The Corporation disposes unrefined portion of the assignment through direct export or other secondary arrangements, including “Swap,” to ensure procurement and delivery of refined petroleum products.”
“The “Swap Arrangement” referred to by the “Bernes Declaration” is a known practice in the industry where equivalent value of product is exchanged for crude oil off take. This is a typical procurement strategy for supply constraint but resource dependent nations to hedge for supply security challenges.
“It is to be noted that the NNPC delivers the international market value of the crude to the Federation on the basis of the General Sales Agreement and Conditions. There is, therefore, no value loss to the Federation.”
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