Petroleum Exploration and Development in Nigeria

Petroleum Exploration and Development in Nigeria

The aim of this chapter is to review the work of past scholars relevant to the area of study. However for the purpose of dairy, the literature will be reviewed along the following:

  • History of Nigerian National Petroleum Corporation (NNPC)
  • Birth of NNPC
  • Petroleum exploration and development in Nigeria
  • The development of Nigeria’s oil industry
  • The NNPC oil sector: Politics and technocracy
  • history and nature of pipeline and product marketing company (PPMC)
  • Oputa Panel inquiring of 1975
  • Objective of the pipeline interlink project
  • Impact of the interlink on the products distribution and marketing industry in Nigeria
  • Government policy of 1994


The Nigerian government established the Nigerian National Oil Corporation (NNPC). The NNPC was conferred with the powers to acquire any asset and liability in the existing oil companies in Nigeria, and to participate in all the phases of the petroleum industry.

The NNPC operated side by side with the ministry of petroleum resources until April 1977 when the two agencies became merged to form the Nigerian National Petroleum Corporation (NNPC). The Decree No 18 of 1981 established the NNPC repealed the NNOC Decree and dissolved the ministry of petroleum resources. Thus the NNPC because the national oil entity charged with the sole responsibility for upstream and downstream development as well as regulating and supervising the petroleum industry.

In 1985, the NNPC was restructured giving rise to five semi-autonomous sectors. These sectors includes oil and gas refineries, petrolchemicals, pipelines and products marketing and petroleum inspectorate. The commercialization of NNPC in 1988 resulted in the creation of twelve subsidiaries. A thirteenth subsidiary, the National Petroleum investment management service (NAPIMS) has been added. The NAPIMS is the subsidiary that oversees the governments investment in joint venture arrangements. Also, it is involved in direct exposition activities.


The other 12 subsidiaries of NNPC are:

  • Nigerian Petroleum Development Company Limited (NNPC)

It is wholly owned by NNPC and is involved in exploration and production of crude oil and gas.

  • Integrated Data Services Company Limited (IDSCL): It is wholly owned by NNPC and is engaged in seismic data acquisition, processing interpretation, petroleum reservoir engineering data evaluation, computer and other ancillary services, in Nigeria and Africa eg Ghana.
  • Worri Refinery and Petrochemicals Company Limited (WARPC): It is wholly owned by NNPC and is engaged in the processing of crude oil into finished petroleum and petrochemical products for domestic consumption and export. Its facilities are located at Warri and Ekpan Warri refinery’s installed capacity is 125,000 barrels per day.


  • Kaduna Refinery and Petro-chemical Company Limited (KRPC): It processes crude oil into refinery products and manufactures linear Alkyi Benzene (LAB) and tins and drums for domestic consumption and export. Its facilities are at Kaduna. It is wholly owned by NNPC and its refinery’s installed capacity is 150,000 barrels a day.


  • Nigeria LNG Company Limited (NLNG): It is a joint venture between NNPC and three other major oil and gas producing companies in Nigeria, Shell, ELF and AGIP, and the international finance corporation. It is engaged in the implementation of a liquefied natural gas project. Firm commitments have been obtained from buyers in W. Europe and USA for Nigeria’s LNG; first shipment of liquefied natural gas took place in Cate 1999.


  • Hyson Nigeria Limited in Affiliation with Calson (Bermuda ) Limited (Hyson-calson): It is a joint venture between NNPC and chevron. It is engaged in petroleum products marketing in West Africa and beyond. It is another source for Nigeria crude oil sale.


  • Port-Harcourt Refinery Company Limited (PHRC): It is engaged in petroleum refinery, especially of specialized petroleum product its facilities are at port-Harcourt and it has an installed capacity of 60000 barrels per day.


  • Pipelines and Products Marketing Company Limited (PPMC): It transports crud oil to the refineries and moved white petroleum products to the markets through a network of pipelines and depots.


  • Nigeria Gas Company Limited (NGC): The company engages in the gathering, treatment, transmission and marketing of Nigeria natural gas and its by products to major industrial and utility gas distribution companies in Nigeria and neighbouring countries, through pipeline and other distribution systems. Eg NEPA and NBL.


  • ELEME Petro-chemicals Company Limited (EPCL): It is a joint venture between NNPC and some private companies. It manufactures petro-chemical products and markets them here in Nigeria and overseas. Its facilities are at Eleme, and it has an installed capacity of 150000 barrels per day.


  • National Engineering and Technical Company (NETCO): It is a joint venture between NNPC and Beclitel, the US engineering and construction firm. The company producers engineering services for NNPC’S operations.


  • NNPC intends to be major player in the international petroleum business, especially in down-stream activities abroad, thus it intends to set up an international trading and marketing company.


With time, the role of government in the oil industry gradually progressed from regulatory to direct involvement in oil exploration and exploitation. Government’s initial interest was mainly in the collection of royalties and other dues from the oil companies, and in the making of statutory laws that regulated the activities of the oil industry. This position was due to the significant contribution of oil to the economy before the later sixties and the absence of locally trained personnel and expertise.

By 1971, a year after the Nigeria civil war, oil had become very important to the economy. To strengthen and established government control in the industry. The Nigerian National Oil Corporation (NNOC) was established by decree in 1971, as an integrated oil company. It was also in that year that Nigeria joined the organization of petroleum exporting countries (OPEC) as the 11th member country. The NNOC had responsibility for both upstream and down stream activities in the industry.

It was believed that if government had more say in the running of the oil industry, it could achieve its goal of rapid industrial and commercial development of the country. And today, government participation stands at 55 percent in shell and 60 percent in chevron, Mobil, Agip, Texaco and Pan Ocean.

However, on April 6, 1977, a merger between the NNOC and the ministry of petroleum resources created the Nigerian National Petroleum Corporation (NNPC). NNPC combined the commercial functions of the former NNOC with the regulatory functions of the former ministry of petroleum resources.


Petroleum production and export plays a dominant role in the nations economy for about 90 percent of the gross export earnings. This dominant role has pushed agriculture, the traditional ministry of the economy from the early fifties and sixties to the background.


The advent of the oil industry can be traced back to 1908, when a German company the Nigerian Bitumen Corporation commenced exploration activities efforts in the Araroni Area, West of Nigeria. These pioneering efforts ended abruptly with the outbreak of the first world war in 1914.

Oil prospecting efforts resumed in 1973, when shell D’Arcy (the forerunner of shell petroleum Development Comprising 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 in 1947. concerted efforts after several years and on investment of over N30 million, led to the first commercial discovering in 1956 at Oloibiri in the Niger Delta.

This discovery, opened up the oil industry in 1961, bringing in mobil, Agip, safrap (Now Eif ), Tenneco and Amoseas (now Texaco/chevron) to join the exploration efforts both in the onshore and offshore areas of Nigeria. This development was enhanced by the extension of the concessionary rights previously a nonopoly of shell, to the newcomers. The objective of the government in doing this was to accelerate the pace of exploration and production of petroleum.

Actual oil production and export from the daibiri field commenced in 1958 with an initial production rate of 5,100 barrels of crude oil per day. Subsequently, the quantity doubled the following year and progressively rose to 2.0 million barrels per day in 1972 and a peak of 2.4 million barrels per day in 1979. Nigeria thereafter, attained the status of a major oil producers, raking seventh in the world in 1972, and has since grown to become the sixth largest oil producing country in the world.


To effectively operate as a world class corporation, NNPC was decentralized in 1985, into five semi-autonomous sectors each headed by a sector co-ordinator. The five sectors were oil and gas, refineries, petroleum, pipelines and products marketing and petroleum inspectorate. The petroleum inspectorate which had been an integral arm of the NNPC has been transferred to the ministry of petroleum resources but still performs its regulatory functions.


Today, the NNPC comprises of six directorates, and eleven subsidiary companies charged with the execution of the corporation business. The new NNPC group is headed by a group managing director and has six group executive directly responsible for corporate services, exploration and production, refining and petro-chemical, engineering and technical, commercial and investments and finance and accounts.


Nigeria it is well known depends on oil for survival. And the Nigerian National Petroleum Corporation (NNPC) is the public corporation responsible for both co-ordinating the activities of he oil industry and managing the oil business on behalf of the Nigeria nation the performance of this corporation in critical, not only for the oil industry, but also for the nation as a whole. Therefore, one acid test of effective government policy is the rightness or otherwise of its policy towards the NNPC.

If a government has policy which by and large stimulates NNPC into effective performance through creating the enabling environment, then the nation will enjoy the benefits of a virile oil economy. On the other hand, a government can deliberately or not create an environment that discourages effective performance.

Development since the late 1980’s especially the persistent shortages of petroleum products suggest that the corporation has not been at its best. And if I am right I the view that the government of the day creates the context enabling environment for optimum performance of the corporation in the context of its relation with succeeding governments.

Decree No 33 of 1979 which set up the corporation reserved for the government through minister and ministry a supervising and regulative functions over the NNPC. The actual management of the corporation in day to day operation is given to the NNPC board and management.

And the good reason for this is to project the corporation from both the less performance – oriented business-cratic culture of the civil service and over-all political influence. The presumption is that an environment of relative autonomy from red tape and politicization will allow merit, efficiency and economic rationality to guide the day to-day operations of the corporation. That decrees was clear in stating that the managing director is the chief executive of the corporation.

This beautiful organizational world created by the decree was, I would say, respected for a while and while that respect lasted, the corporation by and large, performed creditably. Then, suddenly all things started changing.

Two developments all traceable to the changing context of political power, paved the way for altering the rule-governed relationship between government and the corporation. One of these developments took place in the Buhari Wiagbon era when the government allowed the minister to become the Chief executive of the corporation. This was, experts have pointed out, contrary to the law that set up the NNPC, but it was allowed without bothering to amend the decree accordingly. And of course subsequent ministers have tended to take advantage of exploiting it by indulging themselves in the NNPC.

All forms of political influence in undated the corporation since the ministers now and tend to themselves as both the political boss and the chief executive of the corporation. The line between supervision and day to day management was initiated as some of the ministers freely governed the corporation with their preferences, biases, interests and politics.

Since the decree was not amended the law still in favour of the corporations management staff and technocrats. One logical thing to expect was for there technocrats and highly talented experts and professionals in the corporation to resist occasional ministerial high handedness. But these did pay clearly for it. And this is where the second development became relevant.

This second development is the erosion of the old public service culture and the protection it afforded public officers. Under that culture, the public service commission ensured that any public officer was given a fair hearing before discipline him or her. The Muhammed Obasanjo regime weakened the oil public service security systems by creating a system which permitted public servants to be summarily dismissed without even a hearing. Under this new dispensation. Public servants who asked uncomfortable question or had the moral courage to resist ministerial or political indiscretions were summarily dealt with.

In other words once you made the minister the chief executive and removed the security system which enabled some public servants to check the indiscretions of succeeding political executives, you exposed the corporation to unbridled political take over.

The first group of technocrats, who fell to the axe of the political men are the founding fathers of the corporation, who had the moral courage to speak out. You remember the Festus Marihnos, the Sam Akpes, the Cufegis and the Aolomaris. And then of course the Art Adams to mention the most conspicuous ones.

The corporations good record of performance according to set standards, the excellent procedures for recruitment and promotion, and even the corporate solidarity amongst the technocrats in warring off political interference gave way to the ministers interest and sensibilities. Staff could now be moved up or down not on the basis of their performance but because of the preferences of the minister or some political heavy weight on the presidency.

One minister, for instances, introduced quots recruitment which made state of origin rather than merit and performance basis for recruitment.

Another minister allegedly moved one of the his favoured boys up from deputy manager of admission of a subsidiary to the group executive directorship position. This means that in only four years the favoured gentleman jumped from deputy manager to manager, to general manger and the group executive director all because he was the good books of a particular minister.

This sort of situation tended to demoralize the work force, reduce diligence and commitment and introduce. Sycophancy as a survival strategy.

You usually cannot have quality performance when politics take over. Undue politicization of NNPC resulted in displacement of merit, decline in productivity and down grading of discipline. The culture and ethos of the corporations tended to become one of the apathy and sycophancy.

All of this resulted in a certain privatization of NNPC/ do not mean here the conventional/privatization. Rather I mean the process by which non-corporation official tried to use the corporation to presented their self interested private Egenela. In view of this, I would agree that the way out of this impasse is to go ahead with the proposed commercialization of the actions key parastatal in order to free it from the constructing influence of political interventional.



—This article is not complete———–This article is not complete————
This article was extracted from a Project Research Work/Material Topic




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One Comment on “Petroleum Exploration and Development in Nigeria”

  1. Progress Ndubuisi says:

    I think our leaders should device other means of economic development and circulation of money within the contry.

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