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Angola’s Sonangol Q1 2019 result shows what to expect from Nigeria’s NNPC

what to expect from Nigeria’s NNPC
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Angola’s State-owned oil company Sonangol has announced that it generated $2.8 billion with the sale of 45.1 million barrels in the first quarter of 2019 giving a clue to what stakeholders and industry experts should expect from the company’s Nigerian counterpart, Nigeria National Petroleum Corporation (NNPC).

With oil averaging about $63 in Q1 2019, financial performance of Sonangol is expected to give insight to what to expect from Nigeria’s NNPC who have repeatedly failed to meet projected profits as its subsidiaries, particularly refineries, running cost at the headquarters and other arms are always left with whopping deficits.

According to data released by Sonangol’s chairperson of executive committee for International Marketing Luis Manuel due to decrease in average Brent price to $63 in Q1 2019, Sonangol generated $2.8 billion which implies there was a decline in revenue by $211.2 million compared to the same period of 2018.

In Q1 2019, Angola exported crude oil to 12 countries compared to 10 countries in Q4 2018 with China being the biggest buyer of 55.87 percent as compared to 71.28 percent in 2018, followed by India with 15.70 percent against 10.23 percent.

Also, in Q1 2019 Spain bought 7.5 percent of Angola’s crude oil compared to 2.16 percent in 2018, South Africa, United States, South Korea bought 2 percent, 1.96 percent, 1.95 percent respectively while France, Italy, Israel and Uruguay bought less than two percent.

Sonangol  has also announce plans to intensify its efforts to focus on its core business by divesting from 52joint ventures and also reducing staff strength, in a bid to lure investment back to its oil and gas sector.

“We are going to sell, close or put out of our group a lot companies,” Carlos Saturnino Chairman of Sonangol told an oil conference in Paris. “Last year, we identified 52 joint ventures in which we want to sell our equity.”

“Instead of investing in Australia, United States etc, Sonangol wants to become an oil company of reference in the African continent. This is major change for us,” he said, adding the objective was to make Sonangol more robust and agile.

Production has been in steep decline due to maturing fields and lack of investments, which Saturnino also attributed to lack of efficiency in decision-making by the previous administration.

With international Brent crude currently trading near $75, which comes as good news for state owned corporation ranging  from Angola, China, Brazil, Russia, Norway and other countries as it signifies increase in revenue for oil producing countries however, regrettable Nigeria’s NNPC may not benefit from this largesse.

The news of rallying oil prices is even cheerier for Organization Petroleum Exporting Countries (OPEC) members who have had to bear the brunt of oil production cut in the past in a bid to rally up prices.

But, while countries with higher refining capacity may reap the gains of increased oil prices, same could not be said of Nigeria as the country is heavily dependent on imported petroleum products due to the poor state of the its refineries.

With such level of dependence on imported petroleum products, the gain that ought to have accrued to Nigeria is subsequently ploughed back into the payment of subsidies or what government has recently termed under-recovery.

When Brent crude averaged $71.19 per barrel in 2018; BusinessDay analysis of NNPC’s full-year 2018 report shows between January and December 2018, Africa’s biggest oil producing country spent N730.9 billion on under-recovery, popularly called subsidy, while N140.6 billion was also spent on old, perennial problems such as pipeline repairs and management cost.

Figures from the corporation’s operations and financial report for 2018 actual show gains of N393.5 billion made by its upstream and gas-processing subsidiaries – Nigerian Petroleum Development Company (NPDC), Integrated Data Service Limited (IDSL), National Engineering and Technical Company Limited (NETCO), Nigerian Gas Company Limited (NGC), and Nigerian Gas Marketing Company (NGMC) – were wiped off largely by its downstream subsidiary operations which recorded deficits north of N351.7 billion.

“If we do not kill NNPC, NNPC will kill Nigeria,” Nasir El-Rufai said at the 2015 Wole Soyinka Media lecture series. “Any organization that takes 50 percent of federation revenue for itself and gives you the change has no right to exist. It is evil, it must die; it is just the manner of the death that we must talk about.”

For some strange reasons, no Nigerian president has been courageous enough to sign  into a bill called Petroleum Industry Bill (PIB) which could have allow all this NNPC subsidiaries run efficiently.

To remove all the stumbling blocks against the bill, the National Assembly decided to disaggregate the bill into four parts: The Petroleum Industry Governance Bill (PIGB), the Petroleum Industry Fiscal Bill, the Petroleum Industry Administrative Bill, and the Petroleum Industry Host and Impacted Community Development Bill.

 

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