With Prime Minister Narendra Modi focusing on oil diplomacy to seek better crude sourcing deals, petroleum minister Dharmendra Pradhan will visit Nigeria starting May 29. Currently, Pradhan is touring Mexico and Colombia along with top honchos of private energy firms such as Reliance Industries, Cairn India, Adani Gas, GEECL and Videocon Industries, besides officials of state-run companies such as ONGC Videsh and IOC.

“PSU refiner IOC has been seeking more crude oil on long-term contracts from Nigeria. At the same time, the African nation is wanting investments to modernise its refineries. These discussions are likely to feature with the Goodluck Jonathan-headed government of Nigeria when Pradhan visits Abuja,” a government official told FE.

Industry watchers are of the view that IOC may consider taking up modernisation jobs of existing refineries in Nigeria subject to allocation of equivalent oil equity in the producing blocks with substantial recoverable reserves in its favour. Nigeria being a major oil producer and India’s oil security is on priority, this would be a win-win situation for both the nations.

Nigerian National Petroleum Corporation (NNPC) has four refineries, two in Port Harcourt (PHRC), and one each in Kaduna (KRPC) and Warri (WRPC). The refineries have a combined installed capacity of 445,000 barrels per day (bpd). As a result of poor maintenance, theft, and fire, none of these refineries have ever been fully operational. In the recent years, these refineries often operated at their lowest levels of just 30% of capacity. New refineries have been planned for several years now but lack of financing has caused several delays.

Currently, the PSU refiner buys crude oil from Nigeria. Although, IOC is seeking larger supply of Nigerian Crude on term contracts, but nearly 90% of imports are under spot market deals. Nigerian crude are preferred crudes under low sulphur category for IOC refineries. In 2013-14, it imported about 8.5 million tonne of Nigerian crudes.

In 2008-09, the term contract volume was increased from 2 to 3 million tones. Despite IOC seeking higher term volume from NNPC, the supplies have been reduced by nearly half during June 2014 to May 2015. In addition, at many instances NNPC has supplied only 50% of the contractual volume.

To enhance upstream integration, IOC forayed into Nigeria in 2006 by acquiring 25% share in Suntera Nigeria 205 Ltd. (SN205), which holds 70% interest in the onshore block OML 142. The other share holders of SN205 are Suntera Resources Holdings (50%) and India’s Oil India (25%). The remaining 30% PI in OML 142 is held by Summit Oil, a Nigerian player, which is the operator of the block. SN205 is the technical operator of the block and carries out all operations.

IOC’s Servo Lubricants have already entered Nigerian market. In 2013-14, it sold about 518 million tonnes of finished SERVO grade lubricants in the country. In 2015, IOC targets to ramp up marketing of brand lubricants in Nigeria.

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