The Nigerian Petroleum industry is the largest on the African continent. Shell B.P. discovered oil in Oloibiri in the Niger Delta in 1956. Wishing to utilize this newfound opportunity, the first oil field began production in 1958.
Nigeria has a total of 159 oil fields and well in operation according to the Ministry of Petroleum Resources. The most productive region of the Nation is the Coastal Niger Delta Basin or the “South-South” region which encompasses 78 of the 159 oil fields.
Nigeria is the largest producer of sweet oil in OPEC. This sweet oil is similar in composition to petroleum extracted from the North Sea. As US Energy Information Administration, Nigeria’s proven oil reserves range between 16 and 22 billion barrels.
As at 2010, Nigeria provided about 10% of overall US oil imports and ranked as the fifth largest source of oil imports in the US.However, India is now the largest consumer of Nigeria oil.
There are six export terminals in Nigeria. Shell B.P own Forcados and Bonny Terminals. Mobil operates primarily out of the Qua Iboe Terminal while Chevron, Agip and Texaco operate the Escravos, Brass and Pennington Terminals respectively.
NIGERIAN NATURAL GAS
Natural gas reserves are well over 187 trillion ft3, the gas reserves are three times substantial as the crude reserves. The biggest natural gas initiative is the Nigerian Gas Company, which is operated jointly by several companies and the states.
There is also an export gas pipeline in the works known as the West African Gas pipeline which would allow for the transportation of natural gas to Benin, Ghana, Togo and Cote‘d’Ivoire.
The majority of Nigerian natural gas is flared off and it is estimated that Nigeria losses 18.2 million US dollars from the loss of flared gas.
The downstream operation involves the refinery activities of crude oil in Nigeria. Nigeria’s total petroleum refining capacity is 445,000 barrels per day. There are four major oil refineries.
The Warri Refinery and Petrochemical plant with a refining capacity of 125,000 barrels per day, the Port Harcourt Refinery with 150,000 barrels refining capacity (there is also an Old Port Harcourt Refinery with negligible production) as well as the now-defunct Kaduna Refinery. The Port Harcourt and Warri Refineries both operate at only 30% capacity.
OIL AND POLITICS IN NIGERIA
Even before the consolidation of British control over all of present-day Nigeria’s borders in 1914 from the protectorates of Southern and Northern Nigeria, British forces had begun imposing drastic political and economic policies on the Nigerian people which would lead to important consequences in the future.
This was done primarily through the government-owned Royal Niger Company; Interest in oil originated in 1914 with an ordinance making any oil and mineral under Nigerian soil legal property of the crown.
By 1938, the colonial government had granted the state-sponsored company, Shell a monopoly over the exploration of all minerals and Petroleum in the entire colony. In 1960, Nigeria gained full independence from Britain.
The Nigerian Civil war 1967-70 resulted from the coup de tat which took place concurrently in Nigeria as well as the Igbo secessionist movement. The Civil war was motivated by the pogroms in the North against the Eastern people.
It is, however, significant that the desire to accrue profits from the oil revenues combined with ethnic tensions acted as a catalyst for the Igbo-spearheaded secession.
IIn 1971, the then Head of State of the Nigeria Federal government, Yakubu Gowon, nationalized the oil industry by creating the Nigerian Oil Corporation.
Nationalization of the oil sector was also precipitated by Nigeria’s desire to join OPEC. The creation of the NNOC made government participation in the industry legally binding.
By 1974, participation in the oil industry increased to 55%. In 1979, in an effort to establish further control over the industry, the government merged and restructured the NNOC and the Ministry of Petroleum to form NNPC. By 1979, the NNPC had 34.
Also gained 60% participation in the oil industry. It must be noted that corruption in Nigeria is a product of the discovery of oil which led to endemic patronage amongst ethnic and tribal lines.
Corruption, however, reached its Zenith during Shagiri’s regime and with the people of the region receiving little to no share of the oil profit.
Additionally, 1980 saw oil-generated revenue attain an all-time climax of US$24.9 billion but Nigeria still managed an international debt of US$9 billion.
In the 1970s, another disturbing trend had also been the step drop in agriculture correlating roughly with the rise of Federal revenues from Petroleum extraction.
The production of Cocoa, Rubber, Groundnut and Cotton reduced to 43%, 29%, 64% and 65% respectively.
The drop in production was so substantial that by the early 1980s the NPN government was forced to implement a now notorious import license scheme which essentially involved Nigeria, for the first time importing basic food items.
Due to the high rate of corporations in the Nigerian government, Nigeria became hit with huge debt. Hence in 1986, General Ibrahim Babangida implemented the Structural Adjustment Program in order to facilitate debt repayment.
In the 1980s juntas conducted several attempted reorganizations of the NNPC to increase its efficiency.
However, red tape and poor organization are standard with the NNPC being divided into several sub-entities.
Despite the growing participation of the NNPC in the sector, the functionality of the industry is dependent on foreign corporations, not the NNPC.
The sudden jump in oil prices caused by the first Gulf war in 1990, as most researchers confirm was squandered.
The Babaginda junta has been widely accused of “mismanaging” the oil windfall from the Gulf War price jump, which accounted for about $12.5 billion in revenues.
While the country was reeling with international debt, its government were busy siphoning oil revenues into private bank accounts.
The outcry of Nigerians against the 1993 general elections led to the transition of an interim government under Ernest Shonekan which was toppled by Gen. Sanni Abacha.
The regime was marred by widespread human right abuse, there arose peaceful activist organizations that united their member on the basis of ethnicity.
One the such group was MOSOP founded by the Journalist Ken Saro Wiwa. The Abacha regime saw the annihilation of Ken Saro Wiwa and his other 9 Ogoni kinsmen.
The transition back to democratic governance in 1999 did not however bring about peace in the region as political juggernaut seeking office now employ militia groups to coerce voters and to disrupt electoral activities.
The Jonathan-led administration granted the Nigeria Delta militant amnesty which the people are arguing that it should continue under the Buhari-led administration.
IMPLICATIONS OF OIL ON NIGERIA ENVIRONMENT
Unemployment and low standard of living:
Despite Nigeria being the fifth largest producer of petroleum in the world, a large percentage (70%) of its population are unemployed.
Several people live below $1 per day while 43% have no access to clean water. Though Nigeria is a major exporter of crude oil, it imports most of its gasoline.
The Niger Delta compromises 70,000 km2 of wetlands formed primarily by sediment deposition. The Niger Delta region contains one of the highest concentrations of biodiversity on the planet.
The region could experience a loss of 40% of its inhabitable terrain in the next 30 years because of extensive dam construction in the region. This is further compounded by the destruction of vegetation and agricultural lands by oil spills which occurs during Petroleum operations.
Oil spills are caused by the corrosion of pipelines due to poor maintenance and outdated/non-functional production equipment, oil bunkering and pipeline vandalism.
Oil spillage has a great effect on the ecosystem. Nigerian mangrove ecosystems have been wiped out either by settlements or oil.
Offshore spills which are usually much greater in scale contaminated coastal environments and cause a decline in local fishing production. Drinking water is also frequently contaminated and a sheen oil is visible in many localized bodies of water.
Nigeria is more associated with oil extraction than any other country, flared gas releases large amounts of methane and volatile chemicals into the environment. Flaring of gas contributed to high global warming potential.
One of the greatest threats facing the people of the Niger Delta has actually been their own government. Despite the wealth flowing into the nation from oil revenues, many of Nigeria’s socio-economic factors are worse now than they were 30 years ago.
According to the World Bank, most of Nigeria’s oil wealth gets siphoned off by 1% of the population. Endemic patronage and corruption by the political elites characterized the Nigerian polity which had continued to plague this country to this day.
The heavy patronage based on tribal affiliation has fueled ethnic unrest and violence throughout the country, for instance, the Nigerian Civil war. The Niger Delta state where stakes for the control of the immense oil resources are high is also a hotbed of tribal conflict.