by Tolu Orekoya

Nigerian scammers have spread their wings and graduated to the big leagues, invading the oil sector.

In a report by Reuters, no-name firms are claiming to be in the Nigerian oil big-leagues and able to provide thousands of barrels of oil at such a deep discount the buyer could  potentially save up to $10 million.

It sounds too good to be true and it probably is, and the Nigerian National Petroleum Corporation (NNPC) has put out a scam alert  warning of “unsavoury characters purporting to be bona fide staff of the NNPC or contractors to NNPC or purchasers of Nigerian crude oil or contractors to the Nigerian government,” according to Reuters.

Nigeria’s opaque oil market is certainly a key cause of this loophole that scammers exploit. A firm that claimed to have access to the market in the early stages (the oil can be resold up to six times in some cases before being refined), is registered in the UK, two others claimed to be able to give the discount because they had privileged access to NNPC contracts

The trouble of combating these rogue is one that presents almost insurmountable barriers to the government, but they are fighting back by introducing “higher barriers to entry for participation in NNPC’s 2012-2013 term allocations,” according to Reuters. The removal of the group managing director and three executive directors is another move targeted at cleaning the oil business up.

Alexandra Gillies, governance adviser at Revenue Watch Institute, said that massive leap in middlemen involved in the sale of oil since President Jonathan came into office has also played a part in creating the right condition for fraud to occur, and may be the reason why fuel subsidy payments have ballooned.

“If NNPC only issued term contracts to companies with the capacity to lift crude, then nobody would be able to pose as a company flipping (reselling) a cargo. The confusion is a symptom of Nigeria’s sub-optimal system for selling its oil,” she said.

The Reuters piece goes into further detail on the possible scammers. Read an excerpt:

TOO GOOD TO BE TRUE?

Five written offers reviewed by Reuters show a close resemblance to official paperwork circulated among traders, including documents attributed to NNPC, stamps from terminal operators and shipping lists with vessels and loading dates.

They include arcane oil market jargon such as ‘laycan’, which refers to the timeframe for loading and ‘STS’ meaning ship-to-ship transfer of the cargo.

One shipping list showed a tanker called the ‘Elsa Craig’ – a name close to an actual Panama-flagged crude oil tanker called the Ailsa Craig 1 – next to other cargoes booked by western oil majors such as Chevron.

“They are full of imagination,” said a West African oil trader, commenting on the document.

A second oil trader with a London-based oil firm suspected that some of these offers were attempts to resell the oil siphoned off by thieves in the Niger Delta, since the majority of offers were for the local grade Bonny Light.

“A lot of this oil on the side may be bunkered (stolen) and does go to people in the Delta to sell. It’s a side business and I think some buyers are doing good business there,” he said.

A third oil trader said he had considered buying a cargo from an Abuja-based company called Sunny Industrial Lubricant but rejected it only after a member of the compliance team noticed a flaw in the NNPC logo.

NNPC’s logo – a green, red and yellow wagon wheel – has 20 spokes compared with 22 on this document.

“We discovered that the logo was not fully accurate. It’s difficult to distinguish and it’s a big risk,” said the oil trader who asked not to be named.

When contacted by Reuters via email, the firm’s chief executive, Sunny Eze, said he was able to gain access to oil produced in excess of Nigeria’s official OPEC production target, known as ‘off-OPEC’ crude.

“Our company outsources crude oil for buyers from NNPC bulk allocation, otherwise known as OFF-OPEC. We are using our strong influence with NNPC JVC to outsource and deliver products to interested buyers,” he said in an emailed response to Reuters’ questions about the company. OPEC has not assigned individual OPEC country quotas since last year.

Another firm, the UK-registered Current Energy, said in an offer letter that it was reselling 5 million barrels a month of the benchmark Bonny Light grade obtained from an NNPC contract holder at $6 a barrel below the market price.

This amounts to a saving of $6 million per cargo, about 7 percent on a cargo that would currently cost around $90 million.

Reuters shipping data showed that 4 million to 8 million barrels of this grade, sourced from the Niger Delta, have been available for export monthly this year.

When contacted by Reuters, company director Akin Aboaba said he was reselling oil obtained from an NNPC contract holder who had received the oil to compensate for oil spills from regional pipelines.

 

Full story at : Reuters