| Petroleum In Nigeria |
Article Index for Petroleum |
Website Links For Petroleum |
Information AboutPetroleum In Nigeria |
|
JOINT VENTURE COMPANIES All petroleum production and exploration is taken under the auspices of Joint Ventures between foreign multi-national corporations and the Nigerian federal government. This joint venture manifests itself as the Nigerian National Petroleum Corporation , a nationalized state corporation. All companies operating in Nigeria obey government operational rules and naming conventions (companies operating in Nigeria must legally be sub-entities of the main corporation, often incorporating "Nigeria" into its name). Joint ventures account for approximately 95 percent of all crude oil output, while local independent companies operating in marginal fields account for the remaining 5 percent. Additionally, the Nigerian constitution states that all Minerals , Oil , and Gas legally belong to the federal government. Six companies are operating in Nigeria and are listed with their countries of origin (most of the following is extracted from a Human Rights Watch report): ; ''' (SPDC), Shell Nigeria Exploration and Production Company (SNEPCO), Shell Nigeria Gas (SNG), Shell Nigeria Oil Products (SNOP), as well as holding a major stake in Nigeria Liquified Natural Gas (NLNG). Shell formerly operated alongside British Petroleum as Shell-BP, but BP has since sold all of its Nigerian concessions. Most of Shell's operations in Nigeria are conducted through the Shell Petroleum Development Company (SPDC). ;''' region west of the Niger river and offshore in shallow water. It is reported to aim to increase production to 600,000 bpd. ;''' and operates in Nigeria under the subsidery of Mobil Producing Nigeria (MPN). ;''' (20%) produces 150,000 bpd mostly from small onshore fields. ;''' (now TotalFinaElf ) produced approximately 125,000 bpd during 1997, both on and offshore. Elf and Mobil are in dispute over operational control of an offshore field with a production capacity of 90,000 bpd. ; Texaco (now merged with Chevron) :NNPC Texaco-Chevron Joint Venture (formerly Texaco Overseas Petroleum Company of Nigeria Unlimited): A joint venture operated by Texaco and owned by NNPC (60%), Texaco (20%) and Chevron (20%) currently produces about 60,000 bpd from five offshore fields The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria's Oil Producing Communities (Human Rights Watch, 1999). RESERVES AND UPSTREAM PRODUCTION showing locations of oil fields.]] The oil boom of the 1970 s led Nigeria to neglect its Agricultural and light Manufacturing bases in favor of a dependence on Crude Oil . 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 40% 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 US EIA (United States Energy Information Administration) at between 16 and 22 billion barrels , but other sources claim there could be as much as 35.3 billion barrels. 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 2.2 million barrels (350,000 m³) per day. Nearly all of the country's primary reserves are concentrated in and around the delta of the Niger River , but off-shore rigs are also prominent in the well-endowed coastal region. Nigeria is also one of the few major oil-producing nations still capable of increasing its oil output and 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 demands to cut production in order to regulate prices on the international market. More recently, production has been frequently forced to a halt by the demands and actions of the Delta's inhabitants who feel they are being exploited. Nigeria possesses 159 total Oil Fields and 1481 Wells in operation according to the Ministry 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 has 78 oil fields. Most of Nigeria's oil fields are small and scattered about the Delta region and as of 1990 these small, unproductive fields accounted for 62.1% of all Nigerian production. This contrasts the 16 largest fields which produced 37.9% of Nigeria's petroleum at that time ''Nigeria: The Political Economy of Oil''. ISBN 0-19-730014-6. (Khan, Ahmad). As a result of the numerous small fields, an extensive and well-developed pipeline network has been engineered to transport the crude. Also, due to the lack of highly productive fields, money from the jointly operated (with federal government) companies is constantly directed towards exploration and well development. Much of Nigeria's petroleum is classified as "light" or "sweet", meaning the oil is largely free of Sulphur . Nigeria is the largest producer of Sweet Oil in OPEC. This sweet oil is similar in constitution to petroleum extracted from North Sea . This crude oil is known as "Bonny light". Names of other Nigerian crudes are Qua Ibo, Escravos blend, Brass river, Forcados, and Pennington Anfan, all of which are named according to export terminal. In terms of exportation, the U.S. remains Nigeria's largest customer for crude oil, accounting for 40% of the country's total oil exports; Nigeria provides about 10% of overall U.S. oil imports and ranks as the fifth-largest source for U.S. imported oil. There are six petroleum exportation terminals in the country, Shell owns two, while Mobil, Chevron, Texaco, and Agip own one. Shell operates the , 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 km southwest of Port Harcourt and has a storage capacity of 3,558 barrels. Texaco operates the Pennington Terminal'' Nigerian Crude and Gas Industry (NigeriaBusinessInfo.com). Offshore Natural gas Natural Gas reserves are well over 100 trillion ft³ (2,800 km³), the gas reserves are three times as substantial as the crude oil reserves. The biggest natural gas intiative is the Nigerian Liquified Natural Gas Company, which is operated jointly by several companies and the state. It began exploration and production in 1999. Chevron is also attempting to create the Escravos Gas Utilization project which will be cabable of producing 160 billion standard ft³ of gas per day. '' Natural Gas (Online Nigeria Portal). There is also a gas pipeline, known as the West Africa Gas Pipeline , in the works but has encountered numerous setbacks. The pipeline would allow for transportation of natural gas to Benin , Ghana , Togo , and Cote D'Ivoire . The majority of Nigeria's natural gas is Flared Off and it is estimated that Nigeria loses 18.2 million USD daily from this. DOWNSTREAM Nigeria's total petroleum refining capacity is 445,000 barrels per day (bpd), however, only 240,000 bpd was allotted during the 1990s. Subsequently crude oil production for refineries was reduced further to as little as 75,000 bpd during the regime of Sanni Abacha . There are four major oil refineries: the Warri Refinery and Petrochemical Plan which can process 125,000 barrels of crude per day, the New Port Harcourt Refinery which can produce 150,000 barrels per day (there is also an 'Old' Port Harcourt Refinery with negligible production), as well as the now defunt Kaduma Refinery. The Port Harcourt and Warri Refineries both operate at only 30% capacity. It is estimated that demand and consumption of petroleum in Nigeria grows at a rate of 12.8% annually. However, petroleum products are unavailable to most Nigerians and are quite costly, because almost all of the oil extracted by the multinational oil companies is refined overseas, while only a limited quantity is supplied to Nigerians themselves. HISTORY AND POLITICS The Political Economy of petroleum in Nigeria has historically been characterized by endemic Patronage and Corruption by the Political Elites . At both state and federal government levels, power and therefore wealth has typically been monopolized by select Interest Group s who maintain a strong tendency to 'look after their own' by financially rewarding their political supporters. At the state or community level this means that interest groups in power will reward and protect their own; this is typically based on ethnic/tribal or religious affiliation of the interest group. The heavy patronage based on tribal affiliation has fueled ethnic unrest and violence througout Nigeria, but particularly in the Niger Delta states, where the stakes for control of the immense oil resources are very high. At the federal level, political elites have utilized patronage to consolidate power for the ruling government, not only by rewarding their political friends in the federal government, but also by paying off major interest groups at the state or tribal level in order to illicit their cooperation. Inevitably these financial favors are distributed unequally and inefficiently, resulting in concentration of wealth and power in the hands of a small minority . Nigeria is in fact ranked by the Corruption Perceptions Index as the sixth (ranked 152 out of 159 countries surveyed) most corrupt nation on Earth and maintains the second lowest ranking in Africa, ahead of only Chad . Commercially viable Oil was discovered roughly 90 km west of Port Harcourt at Oloibiri (now in Bayelsa State ) by the British colonial government in 1956 . Prior to 1955 , any petroleum was monopolized by the British crown under Shell - BP , which held exclusive rights to all concessions in the country. However, other firms became interested and by the early 1960s Mobil , Texaco , and Gulf had bought concessions . Almost all of the oil uncovered since this time is concentrated in the Niger Delta region, which is typically said to contain the states of Rivers , Bendel , Imo , Cross River , and Ondo . In October of 1960 Nigeria gained full independence from Britain with the British Monarch continuing to preside as Head Of State , but the country quickly altered its relationship with its former colonizers by declaring Nigeria a Federal Republic . But this new republic was short lived as on January 15 , 1966 , a small group of army officers, mostly southeastern Igbos , staged a successful Coup D'etat against the civilian government. This federal military government which assumed power under General Aguiyi-Ironsi , was unable to quiet ethnic tensions or produce a constitution acceptable to all sections of the country. In fact, its efforts to abolish the federal structure raised tensions and led to another coup by largely northern officers in July of the same year. This second coup established the leadership of Major General Yakubu Gowon . The subsequent massacre of thousands of Igbo in the north prompted hundreds of thousands to return to the southeast, where increasingly strong Igbo secessionist sentiment emerged. By May of 1967 the Igbo-dominated region had declared independence as the Republic Of Biafra , plunging Nigeria into Civil War . Implications and causes of Biafra (1966-1970) within Nigeria.]] Igbo successionism arose in part from political isolation during the years following independence, as the southeast increasingly found itself having to compete against both the Yoruba -dominated west and Hausa -dominated north. However, since the southeast encompassed most of the petroleum-rich Niger Delta , the prospect emerged of the southeast annexing this region to become self-sufficient and increasingly prosperous. But, the exclusion of easterners from power made many fear that the oil revenues would be used to benefit areas in the north and west rather than their own. The desire to accrue profits from oil revenues combined with ethnic tensions acted as a catalyst for Igbo succession. Despite oil's prominent role in national affairs, up to this time, the Nigerian federal government had only limited involvement in the Oil Industry , and the government confined its financial involvement in the oil industry to Taxes and Royalties on the oil companies. The companies were subsequently able to set their own price on the petroleum they extracted, and dominated petroleum to such a point that laws governing the oil sector were having a negative effect on Nigerian interests. However, the conflict with Biafra would force changes to the relationship between federal government and the oil companies. The war had a largely negative impact on the oil industry, with strife causing production of crude to drop significantly, particularly in Biafra. Total crude output decreased from 420,000 barrels per day (bpd) in 1966 at the start of the war, to only 140,000 bdp in 1968. Shell alone saw a drop from 367,000 bpd in 1966, to 43,000 in 1968. And in addition to concerns about production, oil companies began experiencing uncertainty as to the future of their investments depending on who prevailed in the war. This led to relations between oil companies and the federal government becoming strained, with the government at one point accusing the oil company Safrap (now TotalFinaElf , but Elf until 1974) of favoring Biafra and enlisting the aid of France for the Biafran cause. Shell, the other major holder of concessions in the southeast, was concerned but placated and limited politically by Britain's staunch support of the Nigerian government in the war effort. After the loss of 300,000 lives, the war concluded in 1970 and resulted in a victory for the Nigerian state, as the seccessionist regions were subsequently brought back into the Nigerian fold . However, the former seccessionist state was split into two new states, Rivers and South Eastern (now Cross River) in order to discourage ideas of independence amongst the people. Founding of a joint venture In May of 1971 the Nigerian federal government, then under the control of General Yakubu Gowon , nationalized the oil industry by creating the Nigerian National Oil Corporation via a decree. Following the war with Biafra, the government felt it necessary to secure and gain more control over the oil industry. Nationalization of the oil sector was also precipitated by Nigeria's desire to join OPEC , which required that member states acquire 51% stake and become increasingly involved in the oil sector. Although the Nigerian government had maintained involvement in the industry prior to 1971 , this was accomplished mainly through business deals on concessions of the foreign firms in operation. The creation of the NNOC made government participation in the industry legally binding. The federal government would continue to consolidate its oil involvement throughout the next several decades: 1972 : The Nigerian government declares that all property not currently owned by a foreign entity is legally the property of the government, which gained jurisdiction of the sale and allocation of concessions to foreign investment. 1974 : Participation in oil industry by government increases to 55 percent. 1975 : Decree 6 increases federal government share in oil sector to 80%, with only 20% going to states. 1976 : First exploration and development venture by NNOC undertaken and drills to uncover commercial quantities of petroleum off-shore. , an entity which would exert more power over the allocation and sale of concessions than the NNOC. By 1979, the NNPC had also gained 60 percent participation in the oil industry. 1984 : Decree 36 reduces government share of oil revenue from 80% to 55%. 32.5% go to states and 10% to local governments. Vultures Feast (Okonta and Douglas, 2001). During the 1980s there were several attempts by the government to re-organize the NNPC and increase its efficiency. However, according to most sources by the early 1990s the NNPC was characterized by chronic inefficiency and waste. Red tape and poor organization are standard, with the NNPC being divided into several sub-entities which each fulfill a particular function. This is despite the NNPCs growing participation in the industry, including development and exploration of numerous off-shore wells. As a result, the functionality of the industry is dependent on foreign corporations, not the NNPC . An environment of crisis (Early 1990s-present) See Also: Niger Delta Conflicts IMPACT OF OIL INDUSTRY ON THE ENVIRONMENT The Niger Delta is comprised of 20,000 square km, 70,000 square km of wetlands formed primarily by , Mangrove Swamp Forests , freshwater Swamps , and lowland Rainforests . This incredibly well-endowed Ecosystem , which contains one of the highest concentrations of Biodiversity on the planet, in addition to supporting the abundant Flora and Fauna , arable terrain that can sustain a wide variety of crops, Economic Trees , and more species of Freshwater Fish than any ecosystem in West Africa . The region could experience a loss of 40% of its inhabitable terrain in the next thirty years as a result of extensive dam construction in the region. The carelessness of the oil industry has also precipiated this situation, which can perhaps be best encapsulated by a 1983 report issued by the NNPC in 1983 , long perform popular unrest surfaced: ''We witnessed the slow poisoning of the waters of this country and the destruciton of vegetation and agricultural land by oil spills which occur during petroleum operations. But since the inception of the oil industry in Nigeria, more than twnety-five years ago, there has been no concerned and effective effort on the part of the government, let alone the oil operators, to control environmental problems associated with the industry'' in Greenpeace International's ''Shell Shocked'',11 (Greenpeace). Oil spills See also: Oil Spill accounts for such a high percentage of all spills is that as a result of the small size of the oilfields in the Niger Delta , there is an extensive network of pipelines between the fields, as well as numerous small networks of flowlines—the narrow diameter pipes that carry oil from wellheads to flowstations—allowing many opportunities for leaks. In onshore areas, most pipelines and flowlines are laid above ground. Pipelines, which have an estimate life span of about fifteen years, are old and susceptible to corrosion. Many of the pipelines are as old as twenty to twenty-five years. Even Shell admits that "most of the facilities were constructed between the 1960s and early 1980s to the then prevailing standards. SPDC Petroleum and Development Company would not build them that way today.” Shell International Petroleum Company, Developments in Nigeria (London: March 1995). Sabotage is performed primarily through what is known as "bunkering",whereby the saboteur attempts to tap the pipeline, and in the process of extraction sometimes the pipeline is damaged or destroyed. Oil extracted in this manner can often be sold for cash compensation. The and Shell's Forcados Terminal tank failure which produced a spillage estimated at 580,000 barrels . One source projects that the total amount oil in barrels spilled between 1960 and 1997 is upwards of 100 million barrels. Oil spillage has a major impact on the ecosystem into which it is released. Immense tracts of the mangrove forests, which are especially susceptible to oil (this is mainly because it is stored in the Soil and re-released annually with inundation), have been destroyed. An estimated 5-10% of Nigerian mangrove ecosystems have been wiped out either by settlement or oil. The rainforest which previously occupied some 7,400 sq. km. of land has disappeared as well. Spills in populated areas often spread out over a wide area, taking out crops and Aquaculture]s Through Contamination Of The Groundwater and soils. Though the consumption of dissolved oxygen by Bacteria feeding on the spilled hydrocarbons also contributes to the death of fishes. In agricultural communities, often a year's supply of food can be destroyed by only a minor leak, debilitating the farmers and their families who depend on the land for their livelihood. Drinking Water is also frequently contaminated, and a sheen of oil is visible in many localized bodies of water. If the drinking water is contaminated, even if no immediate health effects are apparent, the numerous Hydrocarbons and chemicals present in oil are highly Carcinogenic . Although, people often do manifest sickness following consumption of polluted water. Offshore spills, which are usually much greater in scale, contiminate coastal environments and cause a decline in local fishing production. The decline in ecologic Sustainability parallels the increase in oil production since operations began four decades ago. Furthermore, operating companies such as Shell have made public proposals for increasing production significantly in the near future which, because of the careless nature of oil operations in the Delta, will cause the environment to grow increasingly uninhabitable. Natural gas flaring See also: Gas Flare Nigeria flares more Natural Gas associated with oil extraction than any other country on the planet, with estimates suggesting that of the 3.5 billion Cubic Feet of associated gas (AG) produced annually, 2.5 billion cubic feet, or about 70% is wasted via flaring. This equals about 25% of the UK's total natural gas consumption, and is the equivalent to 40% of the entire African continent's gas consumption in 2001 . All statistical data associated with Gas Flaring is notoriously unreliable, but AG wasted during flaring is estimated to cost Nigeria US $2.5 billion on a yearly basis Media Briefing: Gas flaring in Nigeria (Friends of the Earth). The reason for this practice, which is generally agreed world-wide to be wasteful both economically and environmentally, is that in order to maximize production of crude oil, the associated gas accompanying it is often burned off. Even though companies operating in Nigeria also harvest natural gas for commercial purposes, they prefer to extract natural gas from deposits where it is found in isolation, this isolated gas is known as non-associated gas. This occurs because it is costly to separate commercially viable associated gas from the oil. Therefore the AG found with oil is often burned off, in order to increase crude production. Historically, gas flaring began simultaneously with oil extraction in the 1960s by Shell-BP. Although, the British government subsequently acknowledged that the flaring was unacceptable, it was allowed to continue without any real efforts to change infracture and prevent the waste of the gas. This is in contrast to Britain's policies on gas flaring in their own territory, where gas flaring has been reduced to a minimum. In fact, in Western Europe 99% of associated gas is used or re-injected into the ground. Gas flaring is generally discouraged and condemned by the international community, as it contributes greatly to Climate Change . Which ironically can display its most devastating effects in developing countries like Nigeria, and particularly in the semi-arid Sahel regions of Sub-Saharan Africa . The Niger Delta's low-lying plains are also quite vulnerable as they lie only a few meters above Sea-level . Gas flaring in Nigeria is also highly inefficient and releases large amounts has fallen to around 70%, the overall amount of flared gas has increased from 2.1 billion cubic feet to 2.5 billion cubic feet. It seems that the international community, the Nigerian government, and the oil corporations are all in agreement that gas flaring has a negative impact and needs to be stopped. However, in reality, efforts at stemming gas flaring have been slow to be implemented. The practice of gas flaring as it has been allowed since oil production began under British, has become set in stone, and would be costly to overhaul to reduce flaring. As a result, little is done by oil companies. This is in spite of the fact that gas flaring in Nigeria has technically been illegal since 1984 under section 3 of the "Associated Gas Reinjection Act". However, none of the regulations stipulated by this document have ever been made public. OPEC and Shell , the biggest flarer of natural gas in Nigeria, alike claim that only 50% of all associated gas are burnt off via flaring at present. However, this statistic is accepted by few. The World Bank reported in 2004 that, "Nigeria currently flares 75% of the gas it produces." . While other sources make similar projections, between 70 and 75% is the generally accepted percentile of gas flared.. Gas flares can have potentially harmful effects on the health and livelihood of the communities in their vicinity, as they release a variety of poisonous chemicals. Just some of combustion by-products include Nitrogen Dioxide s, Sulphur Dioxide , Volatile Organic Compounds like Benzene , Toluene , Xylene and Hydrogen Sulfide , as well as carcinogens like Benzapyrene and Dioxin . Humans exposed to such substances can suffer from a variety of Respiratory Problems , which have been reported amongst many children in the Delta but have apparently gone uninvestigated. These chemicals can aggravate Asthma , cause breathing difficulties and pain, as well as Chronic Bronchitis . Of particular note is that the chemical Benzene , which is known to be emitted from gas flares in undocumented quantities, is well researched as being a causitive agent for Leukemia and other blood-related diseases. A study done by Climate Justice estimates that exposure to benzene would result in eight new cases of Cancer yearly in Bayelsa State alone.. Often gas flares are located close to local communities, and regularly lack adequate fencing or protection for villagers who may risk nearing the tremendous heat of the flare in order to carry out their daily activities. Many of these communities claim that nearby flares cause Acid Rain which corrodes their homes and other local structures, many of which have metal roofing. However, whether or not the flares contribute to acid rain is debatable, as some independent studies conducted have found that the Sulphur Dioxide and Nitrous Oxide content of most flares was insufficient to establish a link between flaring and acid rain. Other studies from USEIA (U.S. Energy Information Administration) report that gas flaring is, "major contributor to air pollution and acid rain". Flares which are often older and inefficient are rarely relocated away from villages, and are known to coat the land and communities in the area with Soot and damage adjacent vegetation. Almost no vegetation can grow in the area directly surrounding the flare due to the tremendous heat it produces . In November of 2005 a judgement by, "the Federal High Court of Nigeria ordered that gas flaring must stop in a Niger Delta community as it violates guaranteed constitutional rights to life and dignity. In a case brought against the Shell Petroleum Development Company of Nigeria (Shell), Justice C. V. Nwokorie ruled in Benin City that the damaging and wasteful practice of flaring cannot lawfully continue." Sabotage IMPACT OF OIL INDUSTRY ON HUMAN RIGHTS Repression of protest and government corruption Role of oil corporations Poverty and chronic underdevelopment REFERENCES EXTERNAL LINKS
|