Crude Oil in Nigeria: Discovery, Developments & Projections

The petroleum industry in Nigeria is the largest all over the African continent. As of 2014, Nigeria’s petroleum industry contributes about 14% to its economy. Therefore, though the petroleum sector is important, it remains, in fact a small part of the country’s overall diversified economy

The Crude oil found in Nigerian is mostly from the delta basin and they come in two types: light, and comparatively heavy types of crude oil. Both types of crude oil are also said to be paraffinic and they are equally low in their sulfur content.

Drilling began in Nigeria in 1951 and the very first test well was drilled in the Owerri area of the Niger Delta. Oil was discovered in non-commercial quantities at Akata, near Eket in 1953. Before the discovery at Akata, the company had spent around 6 million pounds in exploratory activities in the country. Shell-BP in the pursuit of commercially available petroleum found oil in Oloibiri, Nigeria in 1956.

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 was granted in 1955, Tenneco was granted in 1960, Gulf Oil and Chevron were granted in 1961, Agip was granted in 1962, and Elf was granted in 1962.

Prior to the discovery of oil, Nigeria strongly relied on agricultural exports to other countries to supply their 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 the oil at Oloibiri in the Niger Delta. The first oil field began production in 1958.

After that, the economy of Nigeria should have seemingly have experienced a strong increase. However, competition for the profits from oil created a great level of terror and conflict for those living in the region. Many citizens of Nigeria believe that they haven’t been able to see the economic benefits of oil companies in the state. Additionally, Nigerian government officials have remained majority shareholders in the profits created by the production of Nigerian oil, leading to government capturing of nearly all oil production, and citizens are not seeing socioeconomic benefits, and insist that oil companies should compensate people.

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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 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 companies is constantly directed towards petroleum exploration and production.

Nigeria’s petroleum is classified mostly as light and sweet, as the oil is largely free of sulphur. Nigeria is the largest producer of sweet oil in OPEC. This sweet oil is similar in composition to petroleum extracted from the North Sea. This crude oil is known as Bonny light. Names of other Nigerian crudes, all of which are named according to export terminal, are Qua Ibo, Escravos blend, Brass River, Forcados, and Pennington Anfan.

As recently as 2010, Nigeria provided about 10% of overall U.S. oil imports and ranked as the fifth-largest source for oil imports in the U.S. However, Nigeria ceased exports to the US in July 2014 because of the impact of shale production in America; India is now the largest consumer of Nigerian oil.

There are six petroleum exportation terminals in the country. Shell owns two, while Mobil, Chevron, Texaco, and Agip own one each. Shell also owns the Forcados Terminal, which is capable of storing 13 million barrels of crude oil in conjunction with the nearby Bonny Terminal.

Mobil operates primarily out of the Qua Iboe Terminal in Akwa Ibom State, while Chevron owns the Escravos Terminal located in Delta State and has a storage capacity of 3.6 million barrels. Agip operates the Brass Terminal in Brass, a town 113 kilometres southwest of Port Harcourt and has a storage capacity of 3,558,000 barrels. Texaco operates the Pennington Terminal

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The people of the delta states live in extreme poverty even in the face of great material wealth found in the waters by their homes. According to Amnesty International in 2006, 70% of the people in the Niger River Delta live on less than US$1 per day. For many people, this means finding work in a labour market which is in many instances hostile to them.

Much of the labour in the past has been imported. To a growing degree, the labour force for the oil companies is coming from Nigeria. But discrimination is rampant, and for the most part, locals are discriminated against.

This leads to a situation where the men in the community have to search for temporary employment. This has two negative effects on the community. First it takes the men out of the community as they go in search of work. The second is the nature of temporary employment sets up unsustainable spending habits. They earn some money and spend it thinking it will be easy to earn more, when in many cases this does not turn out to be the case.

As the government officials siphon off all the money generated from oil sales 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. One example of this is the airport at Port Harcourt. Part of a fence was not properly maintained and an Air France flight hit a herd of cattle on the runway in 2005. The airport was closed and still had not reopened by 2007.

 

 

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