Bids to be submitted by mid-Oct.

New contract expected to start from 2021.

State-owned Nigerian National Petroleum Corporation, NNPC, is inviting local and international companies to submit bids to lift Nigerian crude oil and condensate over 2021, the company said September 2.

Nigerian crude oil normally command a premium to Dated Brent, since they are largely light and sweet, making them rich in gasoline and middle distillates, and so are popular with global refiners.

Nigerian crude continues to depend on Asia and Europe as its two main destinations.

Bids for these contracts, which will be valid for a year, are to be submitted by 12:00 pm Nigerian time (1100 GMT) Oct. 15, according to the tender document released by NNPC.

The document specifies that refiners, companies forming part of a government-to-government arrangement, global crude oil traders and “indigenous Nigerian companies engaged in Nigerian oil and gas downstream activities” can apply.

The current Nigerian crude oil term contracts (2018-20) involve the export of around 1 million b/d of crude oil and condensate, out of the 2.2 million b/d Nigeria has the capacity to produce.

The guidelines said the crude will continue to be sold on a free on board (FOB) basis, “subject to the execution of a sales and purchase agreement with selected buyers.”

Sources said the current contract, which had been expected to expire in mid-2020, will be rolled over until the end of the year.

The current 2018-20 crude term contracts are held by more than 60 recipients, making it the largest list Nigeria has ever allocated.

A sizeable chunk of these are domestic Nigerian companies that are new to the world of international oil trading. As a result, a lot of these firms have transferred their allocation to bigger trading companies with more experience and connections with end-consumer markets.

Oil major, Total, along with international oil trading companies Trafigura, Vitol and Glencore, Azerbaijan’s Socar, India’s International Oil Corporation and Russian Lukoil’s trading arm Litasco are some of the companies included in the 2018-20 NNPC term contract list, according to a copy of the list seen by S&P Global Platts.

Africa’s largest oil producer has seen its output fall in 2020 due to the oil price crash amid the coronavirus pandemic and it is now under pressure to adhere to the OPEC+ output cuts.

Nigerian crude oil production has averaged 1.76 million b/d for the first seven months of this year compared with 1.90 million b/d in 2019, according to S&P Global Platts estimates.

Nigeria has already had to cut back its oil production as it faced up to the double whammy of a lack of buyers and storage facilities, even as oil prices recovered from 21-year lows in April.

Crude output is currently around 1.50-1.60 million b/d, according to S&P Global Platts estimates, well below the country’s capacity of 2.2 million b/d.

Production has, however, rebounded steadily over the past three years, after it almost halved to 1.1 million b/d in 2016-17 due to renewed militancy in the Niger Delta.

Nigeria’s compliance with OPEC+ cuts has sometimes drawn the ire of some of its fellow OPEC members.

Under the latest OPEC+ deal, Nigeria had committed to keeping its crude output at 1.412 million b/d in May, June and July, down 417,000 b/d from its baseline of 1.829 million b/d.

From August through December, it is obliged to pump 1.495 million b/d, while from January 2021 to April 2022 it will cap production at 1.579 million b/d.

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