Wednesday, 12 December 2012 00:00 PATRICK ATUANYA

Angolan state oil firm Sonangol’s strong profit growth for 2011 is highlighting the broken model of Nigeria’s state controlled oil company, the NNPC, which is hobbled by corruption, poor management and political interference.
Sonangol posted net profits for 2011 of $3.32 billion, a 32 percent rise and up from $2.52 billion in 2010.
Strong revenues on the back of high oil prices more than offset weak output last year, the company’s chief executive Francisco de Lemos Jose Maria said.
Sonangol is the main player in the oil sector in Angola, Africa’s second-largest oil producer after Nigeria. The company also has exploration activities in Iraq, Venezuela and Brazil.
Sonangol’s performance compares with the NNPC, which was described as “technically insolvent” by a former junior minister for Finance, Remi Babalola.
Analysts say the NNPC with its flawed business model has become a personal slush fund for Nigerian politicians.
Nigeria’s government owes the state-owned oil firm for improper, informal loans used to cover a range of expenses, from a presidential helicopter to maritime security and hardware for military personnel, according to a recent audit.
NNPC has also been forced to shoulder most of the cost of an expensive oil subsidy, with the corporation going from accounting for 60 per cent of Nigeria’s fuel imports in 2011, to now accounting for all of them.
The Federal Government owes the NNPC more than $8.1 billion in fuel subsidy payments, an unnamed NNPC source said last month, straining the corporation’s ability to import petrol and adding to its financial burden.
The NNPC budget (which has to be approved by parliament every year), is often inadequate for its growth capex.
“The NNPC should not be subjected to the National Assembly’s usual legislative processes and appropriation because it operates like a private corporation,” Petroleum Minister Diezani Allison-Madueke, said in a recent statement to the House of Representatives.
The corporation cannot also independently raise funding, leaving its joint venture cash call commitments often unfunded and behind schedule.
The NNPC (established in 1977) in joint partnerships with the major international oil companies (IOCs), produces most of Nigeria’s 2.4 million barrels a day of oil output, which contributes 80 percent of government’s revenue and 95 percent of foreign exchange.
The corporation also has interests in refining, petrochemicals and products transportation, as well as marketing.
The Petroleum Industry Bill (PIB) which aims to unify all the necessary legislation in one bill and provide a clear framework for investment in the energy sector, as well as transform the NNPC into a model state oil company such as Brazil’s Petro bras, has been largely stuck in the National Assembly.
A 2010 joint report by Transparency International and Revenue Watch Institute, found that NNPC had the poorest transparency record out of 44 national and international energy companies examined.
The NNPC received a score of zero - the only company to do so - in the category of “organisational information disclosure”, a measure of the transparency of a company’s deals and partnerships.
A report by the National Assembly in May, uncovered a $6.8 billion fraud involving Nigeria’s fuel subsidy, which is partly run by the NNPC.
The report said NNPC was accountable to no one and owed the government N704 billion ($4.34 billion) for subsidy violations and owed oil traders some $3.5 billion in unpaid bills.
Angola, Africa’s second-largest oil producer behind Nigeria, pumped 1.65 million barrels per day last year, earning the company (SONANGOL) $33.7 billion in revenues as oil prices rose above $100 a barrel.

http://www.businessdayonline.com/NG/index.php/news/76-hot-topic/48888-sonangols-32bn-profit-shows-nnpcs-model-as-broken

I've worked in O&G in Nigeria, and frankly, I think all our leaders should be shot.