Step 1 - Understanding Bonny Light Crude Oil
Bonny Light Crude Oil is named after the Bonny region in Nigeria’s Niger Delta, where it is extracted. “Light” refers to its low density, making it easier to refine. It has low sulfur content, classifying it as “sweet” crude oil. This combination makes it highly valuable in the global market.
Characteristics of Bonny Light Crude Oil
Production Process
Key Facts
Characteristics of Bonny Light Crude Oil
- Low Density: Bonny Light Crude Oil is a “light” crude oil with low density, meaning it flows easily and is easier to transport and refine.
- Low Sulfur Content: Classified as “sweet” crude oil, it has a low sulfur content, reducing the need for extensive desulfurization during refining.
- High API Gravity: With an API gravity typically around 35-40 degrees, it is considered light, enhancing its yield of high-value products like gasoline and diesel.
- Global Market Demand: Due to its favorable refining properties, Bonny Light Crude is highly sought after on the global market, commanding a premium price.
Production Process
- Production Source: Bonny Light Crude Oil (BLCO) is produced from offshore oil fields in the Niger Delta region, primarily from fields operated by joint venture partnerships between the Nigerian National Petroleum Corporation (NNPC) and international oil companies (IOCs).
- Export Process: Once processed, the cargo is exported via tanker vessels from an offshore loading terminal known as Bonny Terminal to international markets, where it is refined into various petroleum products.
Key Facts
- High Demand: Bonny Light Crude Oil (BLCO) is one of Nigeria’s most demanded crude oil grades, accounting for a significant portion of the country’s oil production and exports.
- Trading Categories: BLCO is traded to the international market on only Off OPEC Sales. Other terminals in Nigeria sells through OPEC list except Bonny Light Crude Oil (because it has a Joint Venture Partnership between NNPC and other oil producing companies)
- Sales Channels: BLCO cargoes are typically sold through long-term contracts, spot sales, or auctions conducted by NNPC and its authorized agents, with prices determined based on market conditions, quality specifications, and contractual terms
Step 2 - How Bonny Light Crude Oil is Traded
Bonny Light Crude Oil is named after the Bonny region in Nigeria’s Niger Delta, where it is extracted. “Light” refers to its low density, making it easier to refine. It has low sulfur content, classifying it as “sweet” crude oil. This combination makes it highly valuable in the global market.
Categories of Bonny Light Crude Oil Trade
Benefits and Challenges of OPEC Sales
The Off-OPEC Sales Plan
Categories of Bonny Light Crude Oil Trade
- Trading Categories: Nigerian Crude Oil is traded under two categories: OPEC list and Off OPEC list. Other terminals trade on OPEC list, except Bonny Terminal. Both OPEC list and Off-OPEC list are legal trading routes in Nigeria. The former is regulated by OPEC, while the later is regulated by NNPC
- OPEC Membership and Regulations: Nigeria is one of the 13 member states of OPEC and is bound by OPEC regulations, which restrict members from setting their own prices or selling outside the production quotas set for member states.
Benefits and Challenges of OPEC Sales
- Benefits of OPEC Sales: The benefit of staying under OPEC list is that members can sell oil at higher prices and enjoy a consistent demand for Crude Oil.
- Current Production Quota: Currently, Nigeria’s daily production quota set by OPEC is less than 2 million barrels.
- Population Growth Challenge: However, the challenge is that Nigeria’s population has grown from 55 million people when it joined OPEC in 1971 to 220 million people in 2024.
- Economic Concern: How will the profit from low oil production of less than 2 million barrels meet the needs of a rapidly growing population. Will the profit from this small sales support a growing and challenging economy such as Nigeria. The answer is No.
The Off-OPEC Sales Plan
- Off-OPEC Sales is the Intervention: This is where Off-OPEC sales come in. Off-OPEC is an intervention plan that has legitimately existed since 2013 between the Nigerian government, through its commercial arm known as the NNPC, and oil-producing companies operating in Nigeria.
- NNPC/SHELL Joint Venture (JV) Partnership: The plan is known as the NNPC/OIL COYS Joint Venture (JV) Partnership. Under the JV Partnership, the International Oil Companies (IOCs) such as SHELL/EXXONMOBIL, SAIPEM etc. produce the oil and receive a percentage of the crude oil as settlement, while the larger percentage of the crude oil goes to the NNPC.
- Auction Process: The NNPC then auctions its quota of this larger percentage to oil trading companies, known as Fiduciary Sellers, through a transparent process.