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09 Jul

BRIEF HISTORY OF OIL AND GAS IN NIGERIA

2.2 The History of Oil and Gas in Nigeria.

The occurrence and discovery of petroleum is no new phenomenon. Some writers allege that the petroleum Industry emerged from North America[1]. The first oil well is alleged to have been dug in shush Iran about 500BC[2] and the first truly modern and commercial drilling of oil is said to have begun in Pennsylvania, United States in 1859 (Edwin Drake’s well). Although certain authorities claim that the first modern oil well was sunk in 1806 near Charlottesville in West Virginia[3].

Oil gained prominence especially with the discovery by James Young in 1847[4], the invention of internal combustion engines, the need to fuel war vehicles, and so on. At present, over 100 million barrels of oil are needed to meet daily demands.

The search for oil in Nigeria began in 1908[5] when a German Company, Nigerian Bitumen Corporation explored for oil in the Araromi and Okitipupa in the present Ondo State[6] but had found no oil[7] after drilling about fourteen [14] wells[8]. Then came the World War 1 which hampered its activities[9].

In 1937 and 1938 Shell D’Arcy Petroleum Development Company received an oil exploration license (OEL) covering a vast area[10] (357,000 square miles). It explored for quite a while without any successful find. Its activities were also hampered by the Second World War. The prospect for oil in Nigeria appeared gloomy[11]. In fact, a notable geographer Dudley Stamp expressed his pessimism by declaring in 1953 that Africa had no Oil[12]. A ray of hope was evident in 1956 when Shell-BP struck oil in commercial quantities in Oloibiri[13]. By 1958 production had reached 5,100 barrels per day and the first shipment of Nigerian crude oil was made to Europe[14].

Shell continued to exploit vast areas[15] until 1959 when the concession was extended to other companies some of which include; MOBIL, TENECO, ELF, AGIP, amongst others.

During these times, a host of legislations were created to regulate the industry. The Petroleum Ordinance 1889 and Mineral Regulation (Oil) Ordinance 1907[16] laid down the basic framework for most of the legislations we have today. The Mineral Ordinance[17] was enacted in 1914. Then came the Mineral Oils Ordinance 1914[18], Mineral Oils Ordinance 1925[19] Mineral Ordinance 1946[20] with Section 3 vesting ownership on the crown. Then the Mineral Oils Amendment Ordinance 1958[21] Most of these ordinances were enacted to serve the colonial interests[22]. Dr Nnamdi Azikiwe in 1933 noted that “our raw materials mean more to Europe than our existence to enjoy the fullest of life as do the Europeans, on their own continent respectively[23]”. Similarly, Kwame Nkuruma, observed that our “resources have been, and still are, being used for the greater development of overseas interests[24]”. For example; Section 6 of the Mineral Ordinance 1914 provided that “no lease or license shall be granted except to a British subject or to a British Company registered in Great Britain or in a British Colony and having its principal place of business within her Majesty‘s dominions, the Chairman and the managing director (if any) and the majority of the directors of which are British Subjects

As the Nigerian petroleum industry became more active and productive, more laws were enacted to regulate the industry. In 1959, the Petroleum Profit Tax Ordinance[25] was promulgated to tax the profits of oil companies engaged in exploration and disposal activities.

Following the independence of Nigeria on October 1st 1960 and its severance from the umbilical cord of Britain in 1963, the Petroleum Act 1969[26] was enacted to vest property in petroleum in the Government of Nigeria. The following regulations exist under the Act: -Mineral Oils (Safety) Regulations. -Petroleum Regulations. -Petroleum (Drilling and Production) Regulations. -Petroleum Refinery Regulations. -Crude Oil (Transportation and Shipment) Regulations.- Deep water Block Allocations to Companies (Back in Rights) Regulations. -Oil Prospecting Licenses (Conversion to Oil Mining Leases etc) Regulations

In 1971, Nigeria joined the Organisation of Petroleum Exporting Countries (OPEC). This resulted in the establishment of the Nigerian National Oil Corporation (NNOC)[27] in the same year as part of its membership obligation to the OPEC. In 1977 the Nigerian National Petroleum Corporation (NNPC) was established by the NNPC ACT[28]as a result of the fusion of NNOC with Federal Ministry of Mines and Power.

Over the years, Oil prices have been volatile[29]. For example, in 1973 the world experienced an oil shock that rippled through Nigeria until the mid-1980s[30]. Although experience has shown that the industry usually recovers to equilibrium.

Because of the heavy yield in income, the Nigerian government appears to have displaced agriculture for reliance on petroleum[31].

As at January 2016, the NNPC declared that Nigeria now produces about 6.7 million litres of petrol per day. Although (as at 27, July, 2016) the demand and price of oil are falling coupled with the depleting value of our Naira.

One thing to note from the history of Nigeria’s oil industry is that it is heavily regulated. Various Acts[32] and Agencies[33] have been established in this regard. Although some of these laws and agencies have either failed or become docile due to poor administration, inadequate funding and corruption.

In conclusion, petroleum has a very strategic place in the history of Nigeria and continues to play a significant role in the present day. The Petroleum Industry Bill (which is still under consideration) appears to be an array of hope for the betterment of the oil industry in Nigeria.

[1] See Halliday, Fred. The Middle East in International Relations: Power and Ideology. Cambridge University Pres: USA, 270.

[2] OPEC Bulletin, (1985) July/August.

[3] Yinka Omorogbe: Oil and Gas Law in Nigeria (Lagos, Malthouse Press Limited, 2001) p. 3.

[4] James Young found a way to distil kerosene from petroleum.

[5] Dickie, R.K. (1966). Development of Crude Oil Production in Nigeria and the Federal Governments Control Measures. A Paper presented to the Institute of Petroleum, London: January, at 1pp.

[6] FO Ayodele-akaakar “Appraising the oil & gas laws: A search for enduring legislation for the Niger Delta region” (2001) 3/2 Journal of Sustainable Development in Africa 1 at page 1.

[7] WN Akpan “Between the sectional and the national: Oil, grassroots discontent and civic discourse in Nigeria” (dissertation submitted in fulfilment of the requirements of the degree of doctor of philosophy, Department of Sociology, Rhodes University, South Africa, October 2005) at page 164.

[8] Professor Dominic Asada: Rewriting Concessions Agreement: Nigerian Viewpoint,  Global Journal of Politics and Law Research (www.eajournals.org)  Vol.3, No.2, pp.79-92, April 2015 at page 79.

[9] G. Etikerentse: Nigerian Petroleum Law (2nd ed) (Nigeria, Dredew Publishers, 2004) p. 53.

[10] H.L.Schatzl: Petroleum in Nigeria (Ibadan, Oxford University Press, 1969) p. 1.

[11] Chilenye Nwapi: A Legislative Proposal for Public Participation in Oil and Gas Decision-Making in Nigeria. Journal of African Law, Vol. 54, No. 2 (2010), pp. 184-211 Published by: School of Oriental and African Studies Stable URL: http://www.jstor.org/stable/41149809. Accessed: 19-07-2016 20:00 UTC.

[12] Stamp Africa: A Study in Tropical Development (1953, John Wiley and Sons, Inc) at 53. i.e. 53

[13] See Generally, J. Oke: “Oil Discovery at Oloibiri” The Guardian, Sunday, July 30, 2006, 26.

[14] See M.A. Ajomo, (1987), Law and Changing Policy in Nigeria’s Oil Industry”. Lagos: University of Lagos Press.

[15] Yinka Omorogbe, The Oil and Gas Industry: Exploration and Production Contracts  (Lagos: Florence and Lambard, 2008), pp. 58-59.

[16] No.17. LFN (1990) Cap. 120

[17] LFN 1958 Cap 120

[18] No. 17 of 1914.

[19] No 17 of 1925.

[20] LFN, (1958) Cap.(121).

[21] No. 5 1958.

[22] See Yemi Oke: “Public International Law and Sustainable Utilization of Mineral Resources: The Case of Sub-Saharan Africa” (2009) 21 [No1] Sri Lanka Journal of International Law, pages 85-107 at 92-99.

[23] N. AZIKIWE, “Renascent Africa” (New York, Negro Universities Press, 1969), 7.

[24] K. NKRUMAH, “Neo-colonialism: The Last Stage of Imperialism”, London: Thomas Nelson & Sons Ltd.

[25] Laws of the Federation of Nigeria, (1959) Cap. (15) “Petroleum operations” were defined in the 1959 Ordinance and are currently defined in the Petroleum Profit Tax Act, (1990) Cap. (354) (Nigeria) as “ the winning or obtaining and transportation of petroleum or chargeable oil in Nigeria by or on behalf of a company for its own account by any drilling, mining, extracting or other like operations

[26] Decree No. 51 of 1969 (now Cap. P10 Laws of then Federation of Nigeria (2004).

[27] Established by the NNOC Act No. 18 of 1971.

[28] NNPC Act No. 33 of 1977 now NNPC Act Cap. N 10 LFN 2004.

[29] Yemi Oke; Relevance of Derivatives and Related Debt Instruments to Public-Private Sector Financing of Energy Resources in Nigeria. NIALS Journal of Law and Public Policy. (2004) at page 210.

[30] Ann Genova and Toyin Falola, Oil in Nigeria: A Bibliographical Reconnaissance. History in Africa, Vol. 30 (2003), pp. 133-156. Cambridge University Press. Accessed: 19-07-2016 http://www.jstor.org/stable/3172086

[31] Id. pp. 19-20.

[32] They Include: The Petroleum Act 1969:  Oil Pipelines Act 1956 Cap 145 LFN: Oil in Navigable Waters Act, 1968 No. 34 of 1968; Cap 06 LFN 2004: Petroleum Drilling and Production Regulations, 1969 LN 101 of 1969, Petroleum Refining Regulation, 1974 LN 45 of 1974: Federal Environmental Protection Agency Act of 1988 (CAP F10 LFN, 2004) now repealed by the National Environmental Standards and Regulations Enforcement Agency (Establishment) Act 2007 Act no 25 of 2007: Impact Assessment Act of 1992 Cap. E12 LFN 2004: Oil and Gas Pipelines Regulations, 1995 S.1 14 of 1995, oil pipeline Act, Op cit; Oil In Navigable Water Act, Cap 6 LFN, 2004; Petroleum Profits Act Cap P 13 LFN, 2004; Oil and Gas Export free zone Act, Op cit; Nigeria Liquefied Natural Gas Act, Op cit Niger Delta Development Commission Act, Cap N 86 LFN, 2004; Allocation of Revenue (Abolition of dichotomy in the Application of Principles of Derivation Act, No 5 2004 and Nigerian oil and gas Industry content Development Act, 2010. to mention a few.

[33] Like the Department of Petroleum Resources (DPR), National Oil Spill Detection and Response Agency (NOSDRA) established under an act with the same name (to detect, manage and clean up oil spills): Niger Delta Development Commission (NDDC) to address physical development problems in The Niger Delta: The Oil Mineral Producing Area Development Commission (OMPADEC) established to rehabilitate and develop oil mineral producing areas and tackle ecological problems that have arisen from the exploration of oil minerals.

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Isochukwu

Quite eccentric really

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