The Nigerian National Petroleum Corporation is witnessing an unusual blowout over as a chief executive officer of one of its subsidiaries makes a move to upturn a long standing tradition that allows the nation to lose billions of dollars to a particular international crude oil trader with the active support of senior officials of the Corporation, even as the Corporation had signed a skewed joint venture agreement with the international trader.

By a letter of 24 March, 2010, the Chief Executive Officer of Carlson (Bermuda) Limited, a subsidiary of NNPC responsible for part of the nation’s crude oil trading, Mrs. Aisha Abdulrrahman, addressed to Mr. Paul Greenslade, the Chief Executive of Vitol Sa Geneva, Mrs. Abdulrraham informed her other number at Vitol SA Geneva of the intention of her company to trade crude oil in the open market.

The letter reads thus:
“This is to notify of you of our intention to trade our crude oil cargoes at competitive price in the open market, starting with May 2010 cargoes.
“Please note that Carlson is willing to continue selling some of our cargoes to VITOL at competitive price.

“We thank you in advance for your patronage,” the letter concludes.

This letter must have caused a literal quake within the structure of the NNPC, Abdulrahhman was departing from a more than 17-year tradition of fleecing Nigeria through under pricing of her crude oil by what oil industry experts describe as a questionable joint venture between the NNPC and VITOL SA Geneva which established Calson (Bermuda) Limited with senior officials of the Corporation cornering the shortfall in the crude oil pricing. At the fore of this opposition is Mr. Aminu Babakosa, NNPC’s Group Executive Director, Commercial and Investment.

Using Calson to Fleece Nigeria
Calson was ostensibly set up to market Nigerian Petroleum Products and Crude Oil to the West and Central African sub-region and beyond. When it was first established in 1988, it was a joint venture between the NNPC and Chevron with an equity structure of 51 percent to NNPC and 49 percent to Chevron.

However, on 1 January, 1994, Chevron divested its interest to VITOL Energy (Bermuda) Limited. The purposes of the joint venture were to increase the level of export of petroleum products and crude oil from Nigeria and to develop the expertise of NNPC’s staff in all aspects of international petroleum trading and related activities.

The signed joint venture agreement, however, has some curious provisions. Article 9.4 of the contract states that:

“NNPC recognizes that a key factor in the agreement is the supply of a minimum of 30,000 barrels a day of Nigerian crude oil to Calson for the duration of this agreement. Crude oil allocation is under the control of the Federal Government and not NNPC. NNPC agrees to use all possible efforts to ensure that this supply continues or is increased.”

Article 9.5 adds that:

“NNPC will ensure the allocation to Calson of a minimum of 25,000 metric tones per month of fuel oil for export.” The article further provides that “NNPC will make best efforts to ensure that Calson receives at least 30 percent of all surplus products over and above the internal requirements of Nigeria…NNPC will supply Calson 100 percent of all export Liquefied Petroleum Gas (LPG) from Port Harcourt refinery.

While petroleum industry experts describe Calson joint venture as a veritable pedestal of abuse of administrative privileges by NNPC even as they ask if the Federal Government that is supposed to give approval to such venture partnership, what is shocking is that in just a period of 15 months Nigeria lost $547,725,355 to VITOL and NNPC officials that are positioned to benefit from the administrative heist of crude oil price concessioning.

How the fraud works

NNPC officials use the cover of the joint venture partnership to allocate crude oil shipment to Calson (Bermuda) Limited at OPEC basket rate. The OPEC basket rate is the average of the price quoted for the different quality of crude oil produced by OPEC members.

The Nigerian Bonny Light, also referred to as sweet crude because it is excellent for making gasoline, is usually sold at the open market at a price of four to five dollars premium on each barrel of crude oil. This translates to mean that whoever gets the allocation from NNPC at the OPEC basket rate make a difference of between four to five dollar per barrel.

But according to documents at Fortune&Class Weekly disposal, after a crude oil shipment allocation have been confirmed for Calson (Bermuda) Limited, which has direct Nigerian interest in its operations and revenue, Calson will be compelled by a note from an NNPC official to sell the consignment to VITOL SA at a premium of only three cents.

“What this boils down to is that rather than Calson making the difference in between price and premium it is VITOL that makes the profit with only three cents reverting to Calson, I think that is the reason the Chief Executive of Calson informed VITOL that from May 2010, it would be selling its crude oil cargoes at competitive price and in the open market,” a petroleum industry expert explains.

At the moment, senior officials at the NNPC are said to be up in arms against the new directive to uphold open market competition in the sale of the nation’s crude oil.

However, in response to Fortune&Class Weekly enquiries on under pricing crude oil price through Calson (Bermuda) Limited transfer of its cargoes to VITOL, Mr. Aminu Baba Kosa who chairs the board of Calson on secondment from NNPC, says in a text message:

“Nigeria’s crude oil is never sold in any market at discount. So Calson would have no basis to sell to anybody at discount. Nigeria’s crude oil is monthly priced at the higher end of the market.

To be concluded next week