Overview of Nigerian Petroleum Industry

History of the Nigerian Petroleum Industry

The advent of the oil industry in Nigeria can be traced back to 1908, when a German entity, the Nigerian Bitumen Corporation, commenced exploration activities in the Araromi area, West of Nigeria. These pioneering efforts ended abruptly with the outbreak of the First World War in 1914.

Oil prospecting efforts resumed in 1937, when Shell D'Arcy (the forerunner of Shell Petroleum Development Company of Nigeria) was awarded the sole concessionary rights covering the whole territory of Nigeria. Their activities were also interrupted by the Second World War, but resumed 1947. Concerted efforts after several years, led to the first commercial discovery in 1956 at Oloibiri, in the present day Bayelsa State in the Niger Delta. 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. Subsequently, the quantity increased progressively as more players came onto the oil scene, the production rose to 2.0 million barrels per day in 1972 and a peaking at 2.4 million barrels per day in 1979. Nigeria thereafter, attained the status of a major oil producer, ranking 7th in the world in 1972.

Current Status of the Oil and Gas Industry in Nigeria

Nigeria is the largest oil producer in Africa, holds the largest natural gas reserves on the continent, and is among the world's top five exporters of liquefied natural gas (LNG).Nigeria joined the Organisation 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.

In 2011 there were said to be 37.2 billion barrels of proven oil reserves in Nigeria, producing about 2.4 million barrels per day (bbl/d), ranking the country as the largest oil producer in Africa and the 11th largest in the world.

Nigeria has an estimated 159 trillion cubic feet (Tcf) of proven natural gas reserves, giving the country one of the top ten natural gas endowments in the world. Due to a lack of utilization infrastructure, Nigeria still flares about substantial part of the natural gas it produces and re-injects 12% to enhance oil recovery. The World Bank estimates that Nigeria accounts for 12.5% of the world's total gas flaring.

Nigeria's oil and natural gas resources are the mainstay of the country's economy. The country's oil and natural gas industry typically accounts for 75% of government revenue and 90% of total export earnings. Nigeria's economy is vulnerable to a drop in crude oil prices as it is very dependent on oil revenue.