Petroleum in Nigeria

Oil exploration in Nigeria dates back to 1908 with the appearance of oil at Araromi in the present Ondo State. A German company – Nigeria – Butmen Corporation started this pioneering effort that was short-lived as a result of the outbreak of the 1914-1918 First World War. Another exploratory activity took off in 1937 by an Anglo-Dutch consortium that served as a forerunner of the present-day Shell D’Arcy. The exploratory activity started in 1937 after Shell D’Arcy had been awarded the sole concession rights that covered the whole territory of Nigeria. The company operated under the Mineral Oil Ordinance of No. 17 of 1914 and its amendments of 1925 and 1950 which allowed only companies registered in Britain or any of its protectorates the rights to prospect for oil in Nigeria and further provided that the principal officers of such companies must be British subjects.

The 1939-45 Second World War interrupted the exploratory activities of Shell D’Arcy. The Shell BP undertook the preliminary geological reconnaissance and intensified its geographical surveys in the 1946-51 period. It drilled its first wildcat well in 1951, which later dried up. Shell BP discovered its first commercial crude oil in the country in 1956 at Oloibiri in the present Rivers State. That discovery ushered Nigeria into the international oil arena. Two years later (1958) Shell started oil exportation from Oloibiri field at a rate of 5,100 barrels per day.

In order to increase the pace of oil exploration and to ensure that the country was not dependent on one oil company or nation, Shell’s sole concession right over the country was reviewed and exploration rights were granted to companies of other nationalities Oil companies like Mobil, Gulf, Agip, Safrap (ELF), Tenneco and Amoseas (Texaco/Chevron) were allowed to join the explorers for oil in the onshore and offshore areas of Nigeria.

When Nigeria gained independence in 1960, oil production had been established in the country and it was exporting over 170,000 barrels per day (bpd). It was Gulf Oil Company that first struck offshore oil on the Okan structure of Bendel State in 1964. The licenses that were granted these companies were both offshore and onshore. With these commercial discoveries in petroleum products, the socio-economic and political development of Nigeria began to crystallize as well as its internal dynamics – ethnicity.

All crude oil produced before the mid sixties were exported because of non-availability of local refineries; while domestic demand of petroleum products was met by imports. However, the need to conserve foreign exchange, create job opportunities to some extent and other benefits derivable from setting up refineries locally prompted the government of Nigeria to establish and commission a refinery in Port Harcourt in 1965. The refinery had a processing capacity of 35,000 barrels per day, which was later increase to 60,000 bpd to meet increasing domestic demand while excess fuel oil was exported.