Sudan forced to cancel Nile blend tender due to low bids
November 21, 2008 (SINGAPORE) – Sudan has been forced to cancel its tender to sell 500,000 barrels Nile Blend crude for January delivery because of low bids, traders told Reuters today.
Sudan’s offer came after already skipping October & December spot sales for unknown reasons. The volume of the current tender is almost 50% less than the average of 1-1.2 million barrels per month (bpm).
State oil firm Sudapet cancelled the tender after only receiving bids lower than discounts of $8 a barrel to Minas Indonesia Crude Price (ICP), one trader said.
The Greater Nile project which produces this heavy sweet, high-quality, Nile Blend crude has experienced diminishing productivity lately from 325,000 barrels per day (bpd) to 200,000.
Further limiting its export capacity, Sudan signed an agreement in August to export 500,000 barrels a month of crude to Kenya. It was Sudan’s third such term agreement.
India’s Oil and Natural Gas Corp (ONGC), which holds a 25 percent stake in the project, has briefly stopped issuing monthly tenders to sell Nile Blend, as output has fallen and it is keeping some of its equity for its subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL).
It awarded November-loading Nile Blend crude to Chinaoil at a discount of about $2 a barrel to Dated Brent.
The fate of the unsold cargo is uncertain, but two traders said Sudan is expected to reoffer it later as a February-loading cargo.
Sudan is likely to face sharp drop in revenue and officials have said that 2009 budget will cut down on expenditure and focuses on new revenue opportunities besides petroleum industry.
Oil exports represent 65% of revenue for Sudan and helped fuel its unprecedented economic growth despite US economic sanctions.
However the global financial crisis has led investors to believe that oil demand will be severely curtailed in developed nations and possibly China and India. Crude oil is down more than 60 percent from its all-time peak of $147.27 reached July 11.
(ST)