President Umaru Yar'Adua on Wednesday scrapped state-owned oil group NNPC and set up a national energy council to restructure the oil sector.  The council is headed by the president and has six months to unbundle the Nigerian National Petroleum Corporation into five functional companies, Minister of State for Energy Henry Ajumogobia told reporters. Ajumogobia said the decision followed the recommendation of a panel set up in 2000 on reforms of the sector. "One of the highlights of the new (oil and gas) policy is the unbundling of the NNPC. This is going to create five new organisations out of the existing structure" the minister said after a cabinet meeting.

He said the envisaged five firms were National Petroleum Directorate, National Oil Company, Petroleum Inspectorate Commission, Petroleum Products Distribution Authority and National Oil and Gas Assets Holding and Management Services. Industry sources said the decision to unbundle the NNPC might be connected with a wave of financial scandals that have rocked the group in recent months. The NNPC was created on April 1, 1977 as a merger of the Nigerian National Oil Corporation (NNOC) and the federal ministry of mines and power.  The NNPC manages all the government's interests in the Nigerian oil industry by operating joint venture partnerships with multinational oil companies. Such oil majors include Anglo-Dutch oil giant Shell, ExxonMobil, ChevronTexaco, Total and Agip, a subsidiary of Italy's ENI.

Nigeria loses billions of dollars in oil money to fraudulent activities of government officials and their foreign collaborators. Recently, a government-backed agency for due process reported six million dollars (4.14 million euros) of oil money missing to law enforcement agencies. Audits, conducted by an international consortium led by Britain's Hart Group, initially revealed a much bigger discrepancy in oil receipts of about 300 million dollars. The audits covering 1999 to 2004 were commissioned in 2005 by Nigeria Extractive Industries Transparency Initiative (NEITI).  Last month, Yar'Adua sacked Funsho Kupolokun, NNPC's managing director, and replaced him with an executive director of the company.