The Nigerian National Petroleum Company Limited (NNPC) has sold crude oil forward to the tune of $21.565 billion since 2019, according to a document obtained by THISDAY on Sunday.
This revelation further underscores why the state-owned oil company has struggled to meet its Domestic Crude Supply Obligation (DCSO) to local refiners. The NNPC’s entanglement in multiple forward crude sales agreements has significantly reduced its ability to supply crude oil to domestic refineries, including the much-anticipated Dangote Refinery, forcing them to import feedstock to sustain operations.
The document indicates that since the controversial ‘Project Gazelle’ in 2023, the NNPC has entered into at least two other agreements, ‘Project Leopard’ and ‘Project Gazelle II’, which are expected to cost $2 billion and $7.5 billion, respectively. It remains unclear how much crude oil has been mortgaged under these arrangements, but information obtained by THISDAY shows that the NNPC has signed at least 11 forward sale deals since 2019, excluding its arrangement with Dangote Refinery, which it eventually opted out of.
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Aside from vendor programs worth $750 million and $1.5 billion, which expired in May 2023 and are set to mature in November 2024, nine other projects remain active. These include the $3 billion deal on NLNG Train 7, which matures in May 2029; the $1 billion ‘Project Eagle’ agreement expiring in June 2025; and the $300 million ‘Project Brogue’ set to conclude in January 2027. Additionally, ‘Project Bison,’ valued at $1.04 billion and signed in 2021, will expire in December 2026. ‘Project Yield,’ sealed in 2022 and worth $1 billion, will mature in June 2029, while ‘Offtake Financing,’ a $75 million deal, is set to expire in October 2029.
Perhaps the most contentious of these agreements remains ‘Project Gazelle,’ an oil swap deal valued at $3.4 billion, which is expected to run until 2032. This deal stirred public debate regarding the transparency of crude-for-cash transactions. Despite the controversies, the NNPC has since entered into two additional arrangements—Project Leopard and Project Gazelle II—scheduled for full repayment in January 2029 and April 2034, respectively. Project Leopard is worth $2 billion, while Project Gazelle II is the largest of them all at $7.5 billion.
Although there is a close relationship between Afreximbank and the Nigerian oil authorities, the pan-African lender declined to participate in these latest deals. The bank, which already has a $4.5 billion exposure to NNPC in pre-export financing (PXF) resource-backed loans, cited its internal lending rules as the reason for its refusal. PXF is a financing model where a commodity producer secures upfront cash in exchange for future commodity delivery, usually at a discount. The funds are used for operational expenses, while the buyer secures access to a stable supply of the commodity.
The document revealed that one of the key conditions for the 2023 Gazelle deal was that the NNPC would not raise new U.S. dollar-denominated financing until the principal and interest on the existing loan were fully drawn down. This condition reportedly led Afreximbank to distance itself from the $2 billion Project Leopard deal.
For the larger $7.5 billion deal under Project Gazelle II, there are indications that Saudi Aramco or Abu Dhabi’s ADNOC may step in to provide financing. However, the structure of the deal raises concerns, as the crude oil barrels earmarked for repayment are priced at a “strike price” significantly below the open market rate.
The document notes that this pricing mechanism not only deviates from what is needed to fully cover the principal and interest repayment but also results in a substantial difference between the strike price and the open market price. This difference, rather than being accounted for in Nigeria’s Consolidated Revenue Fund (CRF) or subjected to National Assembly oversight, is reportedly being credited to an offshore debt service reserve account.
PXF loans of this nature are typically priced at the Secured Overnight Financing Rate (SOFR) of six percent, in addition to a Country Risk Premium (CRP) of three to five percent. Furthermore, demurrage charges are applied based on the London Interbank Offered Rate (LIBOR) on a pro-rata basis.
On August 16, 2023, the NNPC secured a $3.3 billion emergency crude repayment loan through Afreximbank. The transaction was intended to support the naira and stabilize the foreign exchange (FX) market amid economic turbulence. The loan was arranged through Project Gazelle Funding Ltd (PGFL), a Special Purpose Vehicle (SPV) incorporated in the Bahamas, with the NNPC serving as the sponsor and committing crude oil as repayment.
The impact of these deals has been most visible in the Nigerian oil sector’s inability to meet local refining needs. Several local refiners, including the Dangote Refinery, have raised concerns over insufficient crude oil supply. Despite numerous interventions by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to ensure compliance with DCSO, domestic refineries continue to struggle with feedstock shortages.
The NUPRC has warned that it may start to deny export permits to oil companies failing to meet their local crude supply commitments. However, the situation is exacerbated by Nigeria’s declining oil production, which has made it nearly impossible to fulfill its forward sales obligations while supplying local refiners. With crude production currently below 1.5 million barrels per day (mbpd), Nigeria is running significantly short of the volumes required to balance its external and domestic obligations.
For Africa’s largest oil producer to comfortably meet its commitments, it needs to produce about 3 million barrels per day. However, under the current circumstances, meeting both forward sales obligations and local refining demand is proving increasingly difficult. This shortfall played a significant role in the government’s decision to terminate its naira-for-crude deal with the Dangote Refinery, which had initially been touted as a strategy to ease the forex burden on local refiners.
The Dangote Refinery, Africa’s largest single-train refinery, has faced persistent challenges in securing sufficient crude oil feedstock from Nigerian producers, including International Oil Companies (IOCs). The inability to source crude locally has forced Dangote to import crude from the international market, a development that undermines the government’s push for local refining and self-sufficiency.