Development of Petroleum Industry in Nigeria

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Petroleum Industry in Nigeria

Petroleum Industry | Crude oil is the most important of all the mineral resources found in Nigeria. Before oil was discovered, agriculture played the dominant role in Nigeria’s development.

Development of Petroleum Industry in Nigeria
Development of Petroleum Industry in Nigeria

Since petroleum discovery, it has become the main-stay of the economy.

Discovery of Petroleum in Nigeria

Oil was first discovered at Oloibiri in the Rivers State in 1956. Although exploration started in 1908, it did not go into commercial quantity until 1956. The Shell-BP Petroleum Development Company of Nigeria was the first oil company to discover crude petroleum in Nigeria.

Since then, other oil companies have joined such as British Petroleum, Mobil, Texaco, Gulfetc.

The most important land marks in the history of oil development in Nigeria were the Hydro-Carbon Oil Refinery Act of 1965 and the Petroleum Decree of 1967.

The Hydro-Carbon Act of 1965 approved the licence for the first refinery at Elese Eleme near Port Harcourt, while the Petroleum Decree 1967 gave the right to fix petroleum prices to government. Hitherto the multinational oil marketing companies were charging at their own discretion. Nigeria has since returned to this status quo since December, 1998.

In order to strengthen the government’s bargaining relationship with the multinational oil companies, it became necessary for the government to expand the then Department of Mines and Power. This also served as a means of providing professional advice to regulate the activities of the oil companies.

The government also took a bold step by acquiring 50 per cent equity shares in the Nigerian Petroleum Refining Companies.

Before 1973, the government had no control over the pricing of petroleum products. The multinational oil companies owned the majority of the product marketing facilities such as storage, distribution networks as well as sales outlets.

Because of distance, petroleum was sold at a cheaper rate in Lagos than elsewhere. In 1973 the retail price policy of petroleum products was brought under government control and a uniform price was established throughout the country.

The period 1975-80 was considered as the ‘Golden era’ of the oil industry in Nigeria. It was often referred to as the period of ‘oil boom’. During the period, Nigeria reached the peak of her oil production, highest oil prices and maximum oil revenue.

In 1977 the government merged the Ministry of Petroleum Resources with the Nigerian National Oil Corporation (NNOC) into a newly created body called the Nigerian National Petroleum Corporation (NNPC).

The primary aim of this merger was to ensure a better coordination of the various activities of the industry and to achieve a better integration of the petroleum sector in the Nigerian economy.

At the international level, the monopoly enjoyed by the international oil companies was considered unsatisfactory by the national governments. Thus in September 1960, Iraq called a meeting of five major Oil producing countries to discuss the activities of the multinational oil companies.

At that meeting, the Organization of Petroleum Exporting Countries (OPEC) was formed.

Nigeria concluded the participation agreement with the major oil companies operating in Nigeria between 1971 and 1979. Safrap in 1971, Agip, Philips, Shell-BP in 1973; Chevron, Gulf, Mobil and Texaco in 1974.

In 1979, the level of state ownership of oil companies operating in Nigeria was raised to 60 per cent. Also in the same year Nigeria nationalized the Nigerian subsidiary of British Petroleum because it was supplying crude oil to South Africa.

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