Step 3 - Role of Fiduciary Sellers in Bonny Light Crude Oil Trade
This step is to give you an overview of the role of fiduciary sellers in trading Bonny Light Crude Oil. It covers their responsibilities, the process for selling under off-OPEC sales, and highlights the advantages and potential drawbacks of this trading method.
Who are Fiduciary Sellers?
Why Do They Exist in the Value Chain of Bonny Light Crude Oil Trade?
The Benefits of Buying from Fiduciary Sellers
Who are Fiduciary Sellers?
- Registered Trading Companies: Fiduciary sellers are registered trading companies authorized by the Nigerian National Petroleum Corporation (NNPC) to act on its behalf in the sale of Bonny Light Crude Oil.
- Buyer Engagement: They are responsible for finding and negotiating with interested buyers.
- Shipping Arrangements: Fiduciary sellers arrange shipping procedures with the NNPC Bnny Terminal superintendent to ensure the smooth transportation of the product.
- Sale Completion: They complete the sale of the product to credible buyers.
- Earning Commissions: Fiduciary sellers earn commissions (usually less 2) on successful sales.
Why Do They Exist in the Value Chain of Bonny Light Crude Oil Trade?
- Crucial Role in the Value Chain: Fiduciary sellers play a crucial role in the value chain, as they are granted an allocation quota, trading certificate, and export license by the NNPC to sell Bonny Light Crude Oil to international buyers.
- Nigerian Origin Requirement: According to Section 3 of the Nigerian Oil and Gas Industry Content Development Act (NOGICD Act), only companies of Nigerian origin are given first consideration for oil lifting licenses. Therefore, sellers must be of Nigerian origin.
- Pricing Flexibility: Fiduciary sellers have the flexibility to set discounts on the product price, often offering rates below the PLATTS benchmark.
- Flexible Quantity Sales: They can sell any quantity to their buyers on a monthly basis or according to the agreed duration.
The Benefits of Buying from Fiduciary Sellers
- Exclusive Purchasing Route: Purchasing from fiduciary sellers is the only way to buy Bonny Light Crude Oil from Nigeria, as the Bonny terminal operates under a joint venture partnership between the NNPC and oil-producing companies (who drill and produce the oil).
- Advantages of Fiduciary Sellers: Fiduciary sellers offer the advantage of securing large quantities of Bonny Light Crude Oil at discounted prices, often lower than OPEC-regulated rates.
- Renewal of Allocation Certificate: One drawback is that once the NNPC quota allocated to a fiduciary seller is exhausted, the allocation certificate must be renewed, which may temporarily halt sales.
- Broker Selection Criteria: As brokers, we select sellers with a minimum of 5 years of export license.
Step 4 - Finding genuine NNPC Fiduciary Seller
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.
Understanding the Sales Process
Documents Required from the Buyer
Documents Required from the Seller
Licensed Broker’s Role
Download the NNPC Off-OPEC Procedure
Understanding the Sales Process
Now that you know who handles the sales of crude oil on behalf of the NNPC, it’s essential to understand the process involved in selecting a seller.
- Choosing a Broker – Purchasing Bonny Light crude oil starts with choosing the right broker—not just any broker, but a government-licensed one whose duty is to connect you with an NNPC fiduciary seller.
- Challenges in Finding a Seller – The most difficult part of the buying process is securing a seller approved by the NNPC. Many sellers are already engaged in long-term contracts with buyers worldwide, leaving limited availability. Others may not offer attractive discounts.
- Seller Verification – An NNPC-approved seller must have a verifiable Proof of Product and an NNPC Letter of Authorization, which includes an NNPC allocation number and a NUPRC (formerly DPR) Export License.
- Access to Approved Sellers – As licensed brokers, we have a list of NNPC-approved fiduciary sellers, complete with recent NNPC allocation numbers and valid DPR export licenses.
- Dealing with Serious Parties – The crude oil supply chain in Nigeria requires serious parties with proven financial capability, not time-wasters. We usually advise buyers to know what they want before requesting sellers, as most sellers are cautious about partnering with buyers who lack an in-depth understanding of the necessary procedures.
Documents Required from the Buyer
As a buyer, you must have the following documents and information ready before approaching a seller:
- Letter of Intent (LOI): This should specify the quantity, product category, port of discharge, contract duration, and shipping method (CIF/FOB/TTO).
- Verifiable Proof of Funds (POF)
- Buyer’s Banking Details
- Company Registration Documents
- Passport of Mandate or Main Contact Person
- Bank-Verifiable Letter of Comfort: Issued by a top 50 global bank.
- Bank Instrument: Accepted guarantees include an irrevocable SBLC via MT760 or Blocked Funds.
- Cargo Inspectors’ Details
- VLCC/Q88 Details: If shipping is on an FOB basis, provide VLCC/Q88 details.
Documents Required from the Seller
The seller must have the following documents and information ready to provide the buyer:
- Verifiable Proof of Product (POP)
- Letter of Authorization from NNPC to Sell
- Sales and Purchase Agreement (SPA)
- NNPC Soft Corporate Offer (SCO)
- 2% Performance Bond: Available in the form of a bank instrument.
- Seller’s Banking Details
Licensed Broker’s Role
The licensed broker will be responsible for issuing and supervising the signing of the following agreements:
- Non-Disclosure Non-Circumvention Agreement (NDNCA)
- Irrevocable Master Fee Protection Agreement (IMFPA)
- Banking Coordinates for Relevant Facilitators
Refer to www.bonnycrude.com for detailed information on the shipping methods—CIF and FOB.
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Download the NNPC Off-OPEC Procedure
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