Vitol wins contract to market Govt. oil from Gabon

Monday, 11 February 2013 00:00 - - {{hitsCtrl.values.hits}}

GENEVA (Reuters): Swiss-based Vitol has signed a long-term contract with Gabon to export oil, trade sources said, making it the only trading house to win an allocation from the West African Government.

Vitol – the world’s top oil trader with annual revenues of nearly $300 billion – already has a strong presence in the region and markets oil from Nigeria and Ghana.

The contract is a coup for Vitol which, like peers such as Glencore, has stepped up efforts to gain access to long-term contracts in order to safeguard volumes amid slim trading profits.

Trading houses have shown increasing interest in Africa and many executives think it could become the fastest growing continent in the next decade, catching up with Asia, which has fuelled growth in the past decade.

Industry sources said that the contract was to buy Rabi Light crude oil directly from state oil firm Gabon Oil Company (GOC) to sell the Government’s share of production.

The duration of the contract was unclear although one source said it was expected to last at least three years.

Provisional shipping lists for March showed that Vitol was awarded a 650,000 barrel cargo of the medium, sweet crude, worth a nominal $ 75 million based on current Brent futures.

Vitol declined comment. Gabon Oil could not be reached for comment.

The industry sources said that Vitol cargoes would be allocated in exchange for investment in the country’s oil sector and not via cash payments.

This is an increasingly common arrangement between trading houses and African governments because of perceived credit risk. In Nigeria, trading houses such as Vitol and Glencore are owed tens of millions of dollars for late fuel payments.

Up until the middle of last year, oil tenders from Gabon were awarded by an oil firm called Petrolin Group and were won by companies such as ExxonMobil and US refiner Hovensa.

An official at Petrolin declined to comment.

Reform to Gabon’s oil sector means that the newly formed GOC will gain an equity share in new blocs and those up for renewal, increasing its share of the country’s production.

This means that GOC, created in mid-2011 by presidential decree, will likely increase the amount of oil it markets directly in future.

Gabon was due to award new licences for offshore oil blocs in 2010 but cancelled the round.

It plans a new licensing round in 2013, and recent discoveries in the region have raised hopes that big finds will be discovered.

Oil production from the former French colony is around 200,500 barrels per day (bpd), down from a 1997 peak of around 370,000 bpd.

Still, Gabon has over three billion barrels of proven reserves and enough to ensure oil revenues for several decades.

French major Total, Royal Dutch Shell and independent production company Perenco all have assets in the country.