OIL AND GAS

We believe in the power of energy to transform lives, enhance communities, advance human progress, and sustain our planet.

With global population forecast to increase by two billion over the next 25 years, even more energy will be required to meet rising demand. It will take all available sources of energy to fill this need — both legacy and alternative sources. And while alternative energy sources are steadily making advances, they will not be capable of meeting future demand alone. Even as we transition to a low emissions future, hydrocarbon-based energy sources will be counted on to meet the bulk of the world’s energy demand well into the future.

We have already demonstrated the potential of technology to reduce emissions from both mobile and stationary sources. We are also capturing emissions and turning them into useful industrial products and manufacturing feedstocks that boost economic growth and job creation. These successes, along with other strategies, have given us one of the lowest CO₂ footprints in the oil and gas industry.

KG is set to have the oil sector integrated in the national economy by way of maximizing the economic revenues of the country, through exporting and importing crude oil, products & gas plus food and beverage products, besides, supplying the domestic refineries and power plants with crude oil.

To achieve this goal, KG has adopted a set of clear and transparent criteria, standards and mechanisms as indicated below:

1- Allocation criteria of crude oil volumes available for export

The main criteria that used by KG for contracting with qualified companies, summarized as follow:

- International oil companies (IOCs), Majors & medium sized governmental and independent integrated companies that handle all activities in the oil industry like exploration, production, transportation and distribution. Furthermore, these companies ranked to be amongst the best in the oil industry as well as they possess hefty refining capacity and huge distribution networks in many parts of the world.

- Companies specialized in the downstream activities, production and distribution of refined products.

- National oil companies (NOCs), and/or Entities, authorized by its respective governments to enter into contracts for purchasing crude oil for their countries' refineries as in China and Japan.

2- Allocation procedure of exportable crude oil

KG undergoes a set of processes upon considering allocations of crude oil volumes to the qualified companies, as follow:

- Marketing all exportable volumes of crude oil to global markets based on international pricing formula through adopting marketing policies to maximize as much as possible oil revenues.

- Priorities in allocating oil quantities is given to companies with substantial refining capacities because of its capabilities to absorb sudden price volatility as well as maintaining its long-term requirements for Nigerian crude oil.

Mechanisms of contracting and executing crude oil export agreements.

KG enters into contracts bi-annually, annually or longer, with qualified companies as per the following process:

A- Contracting mechanism

1- KG sends direct invitation letters to International Oil Companies (IOCs) that are having valid contracts together with the other newly qualified companies to submit their requirements of crude oil for the subsequent contracting period.

2- Requests that only sent through E-mail directly to KG by companies interested in purchasing crude, are to be considered as KG normally disregards hand-submitted requests and also those submitted through agents, intermediaries, international organizations or any of the foreign diplomatic missions operating in Nigeria. However, allocations of crude oil usually offered to qualified companies according to the adopted criteria.

3- Electronically e-mailed purchasing requests from companies, intermediaries, agents and international organizations; showing interest in buying crude oil, received by KG throughout the year. These requests are dealt with in light of the norms and standards adopted by KG`s Technical Committee that formed by an administrative order and consists of a group of experts. The formed committee undertakes the following measures:

· Examining the activities of each company or organization in order to determine the extent of its compatibility with the adopted criteria, through searching in several reputed web sites and reliable sources in the field to decide whether the applicant company/ organization is qualified or not.

· Unqualified companies are disregarded and reasons for disqualification are disclosed to the applicant companies and they will be tagged as" unqualified" in the tables compiled for this purpose. In turn, qualified companies will be categorizing as "new companies" in the set tables.

· These tables will be presented to the Board of Directors and then to the Ministerial Commission for consenting the Technical Committee`s recommendations.

B- Implementation procedures:

1- The execution of the contract commences when crude shipping and commercial financial divisions notified of the contract practical details. This notification will enable the two divisions to implement and follow-up the subject contract that usually starts- up when the buying company (i.e. buyer) submits a request, within a reasonable period, to KG specifying its first nomination date to load a cargo of crude oil subject to contract clauses.

2- KG, on its part, will fix a loading date and inform the buyer accordingly who will, in turn, nominates in writing a vessel for cargo loading at the fixed date. KG, however, will maintain its option of either accepts or rejects the nominated vessel in light of her specifications and the requirements of the loading terminal.

3- The buyer shall open an irrevocable documentary letter of credit (L/C) in a reputed bank accepted by the central bank of Nigeria (CBN) within a period of not less than (7) seven days in prior of the vessel nomination acceptance date. The L/C amount should not in any case be less than the amount estimated to cover the cargo`s value. Subsequently, KG will instruct the loading terminal to load the respective vessel with crude oil provided that destination should not change after the opening of the related L/C.

4- After loading completion of a vessel with the required volume, the respective loading port will produce shipping documents that show loaded quantity, API gravity, Bill of Lading (B/L) date and the final destination of shipment together with any other documents related to the loaded cargo.

5- As from the B/L date, and after elapsing of the contractually specified period, KG calculates and notifies the respective client company of the final unit price of the cargo (i.e. U.S Dollar per Barrel). In turn, the respective client company will settle the value of the cargo within period of not more than (30) days from the B/L date.

6- The Nigerian crude oil is like other producible and exportable crudes that not sold at a fixed price, discount or premium. In fact, it is determined according to a unified pricing mechanism internationally known as the Official Selling Price (OSP) applicable to client companies and for each of the international markets.

In light of the above, KG does emphasize that no negotiations have had ever been taken place with any party whether it is a company, intermediary, agent, international organization or any diplomatic mission on the subject of allocations of crude oil or the official sale prices. It is also worth to stress here that no commissions or discounts have had ever been offered to any of the Buyers because the mechanism adopted in crude oil allocation and pricing is simply applicable to all companies without exception. However, this mechanism, as formerly outlined, embarks with the issuance of an administrative order calling for the formation of a Technical Committee where the legal and auditing authorities being represented therein.

The decision of the formed committee is normally reviewed and discussed by KG`s Board of Directors. However, the Board of Directors, on their part, submits the final recommendation to the Ministerial Commission headed by H.E. Minister of oil and senior deputy minister together with the directors general of the concerned offices at the ministry of oil, such as economics, studies, technical and internal supervision offices, as members.