Under this type of transaction, the contractor, either a refinery or a trading company, should increase a certain amount of crude oil, refine it abroad and return the resulting products to NNPC. Contracts set the expected yields of the products (i.e. the quantities of diesel, kerosene, gasoline, etc.) that the refinery will produce. The refining company can also pay NNPC in cash for all products that Nigeria does not need. In 2008, as fuel shortages worsened, NNPC made an offer for a takeover bid in late 2009 and signed one with BP subsidiary Nigermed. The following year, PPMC signed another takeover bid with the Ivorian refining company Ivorian Refining Company (SIR). Between 2010 and 2015 the crude oil trading model was built on controversial oil-for-product swaps until NNPC signed its first round of direct crude oil and direct-to-air (DSDP) sales in 2016 worth up to 330,000 barrels of oil per day (b/d). Trafigura has presented the swap agreement to the Nigerian House Committee on Petroleum Resources (Downstream) on numerous occasions. All verification and presentation was considered complete and beyond subsequent investigations. As part of the ongoing review, Trafigura was asked a number of questions regarding tax obligations. It should be noted that as Brent Brut Futures expires on the last business day of the second month following the corresponding month, the January futures contract is the fast futures contract for March. As a result, a November swap will be liquidated against the January futures contract.
If it is a WTI swap and not a Brent swap, the comparison with the WTI futures contract from November 1 to November 21 (the expiry date of the December futures contract) and the January futures contract from November 22 to November 30 would be calculated. NNPC`s crude oil trade is primarily contractual and, in 2017/2018, DSDP`s expected contract model, an improved version of the Oil For Products Exchange Agreement, which includes the process of inviting offers of crude oil sales and purchase contracts from potential customers. The NNPC defines pre-qualification requirements for potential customers, including: NNPC also indicated that the petroleum products to be delivered correspond to the crude oil it receives from suppliers. The swap agreement concerned ppMC`s supply of crude oil to TBBV in exchange for refined products. vessels chartered by TBBV for the supply of refined products to PPMC and the provision of the corresponding crude oil exchanges at designated ports. PPMC was responsible for all customs clearance and importation. As with all international companies that withdrew crude oil from Nigeria, crude oil exports were made on the basis of FOB in accordance with NNPC`s general terms and conditions of sale. A swap is an agreement whereby a floating price (or merchant) is exchanged for a fixed price or a fixed price for a variable price over a period of time. The instrument is called a swap because buyers and sellers “exchange” cash flows with each other. March 4, 2016 – In October 2010, Trafigura Beheer BV (TBBV), a legally established company based in the Netherlands, entered into a refined products exchange agreement (“RPEA”) with pipelines and products marketing company (PPMC) in Nigeria.
The agreement was a standard international treaty governed by Incoterms trade rules. Oil for swaps comes from nNCCs 445,000 barrels per day “Domestic Crude Allocation” (DCA). The DCA provides the total volume of crude oil generally available for trade under the various contractual models that NNPC has used over the years.