Nigeria's crude oil off-takers will need to show that they are capable of raising letters of credit (L/Cs) under new crude oil term contracts expected soon from the Nigerian National Petroleum Corporation (NNPC).

The new terms are part of NNPC's efforts to make the sector more transparent and accountable.

Competitive process

Under the proposed Offshore Processing Agreements (OPAs), the number of companies allowed to deal in Nigerian crude oil will be pruned from 43 to 16 in the 2015-16 term.

A rigorous competitive process is expected by NNPC, whose officials say that full details of the contracts and the bidding process will be published soon in major national and international print media.

Guidelines for the selection of new off-takers would then be published and subsequently a special bid evaluation committee would be constituted to conduct due diligence on successful applicants.

L/C requirement

"We are throwing the tender process open for competitive bidding by strong industry players with track records of integrity and financial strength to execute the project," according to a statement by NNPC.

It has expressed concerns over the existence of so-called 'armchair' companies with no track record or experience in the market that have in recent years been licensed to trade in Nigerian crude.

A senior NNPC official says that as part of the selection criteria, bidders for the OPAs would be required to provide proof they could raise L/Cs for the value of the crude they intend to trade.

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