In this post we will be looking at brief history of oil in Nigeria, Oil Production and exploration, The positive/Negative Impact of Oil Discovery and Production, Independent and indigenous oil and gas companies operating in Nigeria.
INTRODUCTION.
Nigeria is the largest oil and gas producer in Africa. Crude oil from the Niger delta basin comes in two types: light, and comparatively heavy – the lighter around 36 gravity and the heavier, 20–25 gravity. Both types are paraffinic and low in sulfur. Nigeria’s economy and budget has been largely supported from income and revenues generated from the petroleum industry since 1960. Statistics as of February 2021 shows that the Nigeria’s oil sector contributes to about 9% of the entire country’s GDP. Nigeria as the largest oil and gas producer in Africa, is a major exporter of Crude oil and petroleum products to the United States of America. In 2010, Nigeria exported over one million barrels per day to the United States of America representing 9% of the U.S total crude oil and petroleum products imports and over 40% of Nigeria exports. The need for holistic reforms in the Petroleum Industry, ease of doing business, and encouragement of local content in the industry birthed the Petroleum Industry Bill by the Goodluck Jonathan administration on July 18, 2008.
A BRIEF HISTORY OF OIL IN NIGERIA.
The history of oil exploration in Nigeria started back in 1903 when Nigerian Bitumen Corporation conducted exploratory work in the country; at the onset of World War, I the firm’s operations were stopped. Due to the lack of technological and financial resources of small oil companies, large oil companies took over the exploration of commercial oil in the country. Thereafter, licenses were given to D’Arcy Exploration Company and Whitehall Petroleum but neither company found oil of commercial value and they returned their licenses in 1923. A new license covering 920,000 square kilometers (357,000 square miles) was given to Shell D’arcy Petroleum Development Company of Nigeria, a consortium of Shell and BP (then known as Anglo-Iranian). The company began exploratory work in 1937. The association was granted license to explore oil all over the territory of Nigeria but the acreage allotted to the company in the original license was reduced in 1951 and then between 1955 and 1957. Drilling activities started in 1951 with the first test well drilled in Owerri area. Oil was discovered in non-commercial quantities at Akata, near Eket in 1953. Prior to the Akata find, the company had spent around £6 million on exploratory activities in the country.
In the pursuit of commercially available petroleum, Oil was discovered in Nigeria in 1956 at Oloibiri in the Niger Delta after half a century of exploration. The discovery was made by Shell-BP, at the time the sole concessionaire. Other important oil wells discovered during the period were Afam and Bomu in Ogoni territory. Production of crude oil began in 1957, and in 1960 a total of 847,000 tonnes of crude oil was exported. Towards the end of the 1950s, non-British firms were granted license to explore for oil: Mobil in 1955, Tenneco in 1960, Gulf Oil and later Chevron in 1961, Agip in 1962, and Elf in 1962. Prior to the discovery of oil, Nigeria (like many other African countries) strongly relied on agricultural exports to supply its economy. Many Nigerians thought the developers were looking for palm oil. But after nearly 50 years searching for oil in the country, Shell-BP discovered oil at Oloibiri in the Niger Delta. The first oil field began production in 1958. Nigeria joined the ranks of oil producers in 1958 when its first oil field came on stream producing 5,100 bpd. After 1960, exploration rights in onshore and offshore areas adjoining the Niger Delta were extended to other foreign companies. In 1965 the EA field was discovered by Shell in shallow water southeast of Warri. In 1970, the end of the Biafran war coincided with the rise in the world oil price, and Nigeria was able to reap instant riches from its oil production. Nigeria joined the Organization of Petroleum Exporting Countries (OPEC) in 1971 and established the Nigerian National Petroleum Company (NNPC) in 1977, a state owned and controlled company which is a major player in both the upstream and downstream sectors. Following the discovery of crude oil by Shell D’Arcy Petroleum, pioneer production began in 1958 from the company’s oil field in Oloibiri in the Eastern Niger Delta. By the late sixties and early seventies, Nigeria had attained a production level of over 2 million barrels of crude oil a day. Although production figures dropped in the eighties due to economic slump, 2004 saw a total rejuvenation of oil production to a record level of 2.5 million barrels per day. Current development strategies are aimed at increasing production to 4million barrels per day by the year 2010. Petroleum production and export play a dominant role in Nigeria’s economy and account for about 90% of her gross earnings. This dominant role has pushed agriculture, the traditional mainstay of the economy, from the early fifties and sixties, to the background.
OIL PRODUCTION AND EXPLORATION.
As of 2000, oil and gas exports accounted for more than 98% of export earnings and about 83% of federal government revenue, as well as generating more than 14% of its GDP. It also provides 95% of foreign exchange earnings, and about 65% of government budgetary revenues. Nigeria’s proven oil reserves are estimated by the United States Energy Information Administration (EIA) at between 16 and 22 billion barrels (2.5×109 and 3.5×109 m3), but other sources claim there could be as much as 35.3 billion barrels (5.61×109 m3). Its reserves make Nigeria the tenth most petroleum-rich nation and by the far the most affluent in Africa. In mid-2001 its crude oil production was averaging around 2,200,000 barrels (350,000 m3) per day. It is expected that the industry will continue to be profitable based on an average bench mark oil price of $85-$90 per barrel. Nearly all of the country’s primary reserves are concentrated in around the delta of the Niger River, but off-shore rigs are also prominent in the well-endowed coastal region. Nigeria is one of the few major oil-producing nations still capable of increasing its oil output. Unlike most of the other OPEC countries, Nigeria is not projected to exceed peak production until at least 2009. The reason for Nigeria’s relative unproductivity is primarily OPEC regulations on production to regulate prices on the international market. More recently, production has been disrupted intermittently by the protests of the Niger Delta’s inhabitants, who feel they are being exploited. Nigeria has a total of 159 oil fields and 1481 wells in operation according to the Department of Petroleum Resources. The most productive region of the nation is the coastal Niger Delta Basin in the Niger Delta or “South-south” region which encompasses 78 of the 159 oil fields. Most of Nigeria’s oil fields are small and scattered, and as of 1990, these small unproductive fields accounted for 62.1% of all Nigerian production. This contrasts with the sixteen largest fields which produced 37.9% of Nigeria’s petroleum at that time. As a result of the numerous small fields, an extensive and well-developed pipeline network has been engineered to transport the crude oil. Also because of the lack of highly productive fields, money from the jointly operated (with the federal government) companies is constantly directed towards petroleum exploration and production.
THE POSITIVE IMPACT OF OIL DISCOVERY AND PRODUCTION.
- contribute to economic growth and development
- It serves as a major foreign exchange earner
- It generates revenue to the country through payments of royalties’ license fees, rents, and petroleum profit tax by various oil companies.
- It also creates a high employment opportunity
- It serves as a source of fuel and power to individuals, firms and government.
THE NAGETIVE IMPACT OF OIL DISCOVERY AND PRODUCTION
- Repression of protest and government corruption
- Gas flaring associated with oil production in the Niger Delta is very unfriendly to natural ecosystems and biodiversity.
- Leakages and fire incidents are also associated with gas production and transportation.
- Dangerous emissions fuel climate change
- Drilling disrupts wildlife habitat
- Oil spills can be deadly to animals
- Oil spills contaminates water
Independent And Indigenous Oil and Gas Companies Operating in Nigeria.
- Addax Petroleum Nigeria Limited
- Aiteo Group
- AMNI International Petroleum Development Company Ltd.
- Consolidated Oil Limited.
- Dubri Oil Company Ltd.
- Emerald Energy Resources Ltd
- Yinka Folawiyo Petroleum Company Ltd
Oil and Gas Companies in Nigeria.
- Nexen
- Hardy Oil and Gas Plc
- Total
- Petrobras
- Nigerian Agip Oil Company Limited
- Shell
- Statoil
- Exxon Mobil
CONCLUTIONS.
The impact of oil on the Nigerian economy is either a blessing or a curse on its economy. In the case of Nigeria, it is both a blessing and a curse since it has assisted in increased export and revenue generation which has been used for developmental purposes while on the other hand it has been a curse since the discovery of oil which has led to the neglect of other sectors of the Nigerian economy that would have positively impacted on the economy like agriculture and manufacturing sectors. Also, the government officials siphon off all the money generated from oil sales and the infrastructure suffers. Most of the villages do not have electricity or even running water. They do not have good access to schools or medical clinics. For many, even clean drinking water is difficult to come by. The deterioration of the infrastructure in the delta states is so severe it is even a problem in the more urban areas. The leadership of the Niger Delta region appears responsible for most of the underdevelopment in the region.