Petroleum in Nigeria

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The extraction and drilling of petroleum in Nigeria is the largest industry and main generator of GDP in the West African nation which is also the continent's most populous. Since the British discovered oil in the Niger Delta in the late 1950s, the oil industry has been marred by political and economic strife largely due to a long history of corrupt military regimes and complicity of multinational corporations, notably Royal Dutch Shell. Despite this, it was not until the early 1990s that the situation was given international attention, particularly following the murder by the Nigerian state of playwright and activist Ken Saro-Wiwa, provoking the immediate suspension of Nigeria from the Commonwealth of Nations. Nigeria is identified by the international community and the firms in operation there as a major concern with regards to human rights and environmental degradation. The Nigerian government, oil corporations, and oil-dependent Western countries have been criticized as too slow to implement reforms aimed at aiding a desperately under-developed area and remediating the unsustainable environmental degradation that petroleum extraction has wrought.

Contents 1 Geology and reserves 2 Production and exploration 2.1 Offshore 2.2 Natural gas 2.3 Downstream 3 History and Politics 3.1 The colonial legacy (1800s-1960s) 3.2 Implications and causes of civil war (1966-1970) 3.3 Industry nationalization (1970-1979) 3.4 Attempted democracy and debt (1979-1983) 3.5 Return to military rule and electoral abortion (1983-1993) 3.6 An environment of crisis (1993-present) 4 Joint Venture companies 5 Impact of oil industry on the environment 5.1 Oil spills 5.2 Natural gas flaring 5.3 Sabotage 6 Impact of oil industry on human rights 6.1 Repression of protest and government corruption 6.2 Role of oil corporations 6.3 Poverty and chronic underdevelopment 7 References 8 External links

[edit] Geology and reserves

See also: Niger Delta province

[edit] Production and exploration

As of 2000, oil and gas exports accounted for more than 98% of export earnings and about 83% of federal government revenue, as well as generating more than 40% of its GDP. It also provides 95% of foreign exchange earnings, and about 65% of government budgetary revenues.

Nigeria's proven oil reserves are estimated by the US EIA (United States Energy Information Administration) at between 16 and 22 billion barrels,^[1] but other sources claim there could be as much as 35.3 billion barrels. Its reserves make Nigeria the tenth most petroleum-rich nation, and by the far the most affluent in Africa. In mid-2001 its crude oil production was averaging around 2.2 million barrels (350,000 m³) per day.

Nearly all of the country's primary reserves are concentrated in and around the delta of the Niger River, but off-shore rigs are also prominent in the well-endowed coastal region. Nigeria is one of the few major oil-producing nations still capable of increasing its oil output and unlike most of the other OPEC countries, Nigeria is not projected to exceed peak production until at least 2009. The reason for Nigeria's relative unproductivity is primarily OPEC regulations on production in order to regulate prices on the international market. More recently, production has been forced to a halt intermittently by the demands and actions of the Niger Delta's inhabitants who feel they are being exploited.

Nigeria has 159 total oil fields and 1481 wells in operation according to the Ministry of Petroleum Resources.^[2] The most productive region of the nation is the coastal Niger Delta Basin in the Niger Delta or "South-south" region which encompasses 78 of the 159 oil fields. Most of Nigeria's oil fields are small and scattered, and as of 1990, these small unproductive fields accounted for 62.1% of all Nigerian production. This contrasts with the sixteen largest fields which produced 37.9% of Nigeria's petroleum at that time.^[3] As a result of the numerous small fields, an extensive and well-developed pipeline network has been engineered to transport the crude. Also due to the lack of highly productive fields, money from the jointly operated (with the federal government) companies is constantly directed towards petroleum exploration and production.

Much of Nigeria's petroleum is classified as "light" or "sweet", meaning the oil is largely free of sulphur. Nigeria is the largest producer of sweet oil in OPEC. This sweet oil is similar in constitution to petroleum extracted from North Sea. This crude oil is known as "Bonny light". Names of other Nigerian crudes, all of which are named according to export terminal, are Qua Ibo, Escravos blend, Brass river, Forcados, and Pennington Anfan.

In terms of exportation, the U.S. remains Nigeria's largest customer for crude oil, accounting for 40% of the country's total oil exports; Nigeria provides about 10% of overall U.S. oil imports and ranks as the fifth-largest source for U.S. imported oil.

There are six petroleum exportation terminals in the country, Shell owns two, while Mobil, Chevron, Texaco, and Agip own one each. Shell also owns the Forcados Terminal, which is capable of storing 13 million barrels of crude oil in conjunction with the nearby Bonny Terminal. Mobil operates primarily out of the Qua Ibo Terminal in Akwa Ibom State, while Chevron owns the Escravos Terminal located in Delta State and has a storage capacity of 3.6 million barrels. Agip operates the Brass Terminal in Brass, a town 113 km southwest of Port Harcourt and has a storage capacity of 3,558 barrels. Texaco operates the Pennington Terminal.^[4]

[edit] Offshore

[edit] Natural gas

Natural gas reserves are well over 100 trillion ft³ (2,800 km³), the gas reserves are three times as substantial as the crude oil reserves. The biggest natural gas initiative is the Nigerian Liquified Natural Gas Company, which is operated jointly by several companies and the state. It began exploration and production in 1999. Chevron is also attempting to create the Escravos Gas Utilization project which will be capable of producing 160 million standard ft³ of gas per day.^[5]

There is also a gas pipeline, known as the West African Gas Pipeline, in the works but has encountered numerous setbacks. The pipeline would allow for transportation of natural gas to Benin, Ghana, Togo, and Cote d'Ivoire. The majority of Nigeria's natural gas is flared off and it is estimated that Nigeria loses 18.2 million USD daily from this.^[5]

[edit] Downstream

Nigeria's total petroleum refining capacity is 445,000 barrels per day (bpd), however, only 240,000 bpd was allotted during the 1990s. Subsequently crude oil production for refineries was reduced further to as little as 75,000 bpd during the regime of Sanni Abacha. There are four major oil refineries: the Warri Refinery and Petrochemical Plan which can process 125,000 barrels of crude per day, the New Port Harcourt Refinery which can produce 150,000 barrels per day (there is also an 'Old' Port Harcourt Refinery with negligible production), as well as the now defunt Kaduma Refinery. The Port Harcourt and Warri Refineries both operate at only 30% capacity.^[4]

It is estimated that demand and consumption of petroleum in Nigeria grows at a rate of 12.8% annually.^[4] However, petroleum products are unavailable to most Nigerians and are quite costly, because almost all of the oil extracted by the multinational oil companies is refined overseas, while only a limited quantity is supplied to Nigerians themselves.

[edit] History and Politics

See also: History of Nigeria

See also: Niger Delta

Prior to its official amalgamation into a singular nation by the military forces of the British Empire in 1914, the territory of Nigeria was a loose collection of autonomous states, villages, and ethnic communities. Many of these established themselves as pillars of art, trade, and politics in West Africa as late as the 1800s; three of these cultural entities, the Hausa-Fulani,the Igbo (sometimes spelled Ibo), and the Yoruba grew extremely prominent in the region before the arrival of foreigners, dictated British colonial policies, and dominate national politics in Nigeria to this day.

The modern Hausa and Fula societies in northern Nigeria are the cultural successors of the Sokoto Caliphate, a theocratic state founded by Muslim reformer empire-maker Uthman dan Fodio in 1817. Geographically isolated in the north, the Caliphate was governed by Islamic laws as prescribed by dan Fodio's Kitab al-Farq and maintained greater links commercially and culturally to North Africa and the Arab states than to West Africa and the Atlantic.

By contrast, the Yoruba and Igbo in the south had regularly experienced contact with Europeans since at least the 1500s. A minority of southerners converted to Christianity even prior to the establishment of permanent British control; the majority followed traditional indigenous religions, worshipping myriad deities with vast domains spanning both cosmic and terrestrial spheres. Coastal Nigerians established thriving trade both regionally and abroad, fashioning the coast into a hub for products like palm oil, a good sought after by rapidly industrializing Europe, while also serving as key source for the slave trade prior to its international banning (the region came to be known as the Slave Coast as a result).

The Niger Delta region, which is roughly synonymous with the Niger Delta province in location and the contemporary heart of the petroleum industry, is and was a zone of dense cultural diversity and is currently inhabited by roughly forty ethnic groups speaking an estimated 250 dialects. Some of the more relevant ethnicities groups include the Ijaw, Itsekiri, and Ogoni. The Ijaw (sometimes spelled Ijo), the fourth most populace tribe in Nigeria and by far the largest in the Delta region, lived during late medieval times in small fishing villages within the inlets of the delta; however by the sixteenth century, as the slave trade grew in importance, Ijaw port cities like Bonny and Brass developed into major trading states which served as major exporters of fish and other goods regionally. Other states such as the those of Calabar (an Efik state) and the Itsekiri domain of Warri sprang up at this time as well. ^[6]

[edit] The colonial legacy (1800s-1960s)

Even before the consolidation of British control over all of present day Nigeria's borders in 1914 from the protectorates of Southern and Northern Nigeria, British forces had begun imposing drastic political and economic policies on the Nigerian people which would lead to important consequences in the future. Originally this was done primarily through the government-owned Royal Niger Company. The company was crucial in securing most of Nigeria's major ports and monopolized coastal trade; this resulted in the severing of ties which linked the area to the flourishing West African regional trade network, in favor of the exportation of cheap natural resources and cash crops to industrializing nations. Most of the population eventually abandoned food production for such market-dependent crops (peanuts and cotton in the north, palm oil in the east, and cocoa in the west).^[6] From the beginning divide and rule tactics were employed by both traders and administrators by highlighting ethno-religious differences and playing groups against one another. After the 1914, the north was permitted a system of indirect rule under authoritarian leaders, while in the south the British exercised control directly.^[6]

Interest in Nigerian oil originated in 1914 with an ordinance making any oil and mineral under Nigerian soil legal property of the Crown. By 1938 the colonial government had granted the state-sponsored company, Shell (then known as Shell D'Arcy) monopoly over exploration of all minerals and petroleum throughout the entire colony.^[6] Commercially viable oil was discovered by Shell roughly 90 km west of the soon-to-be oil capital of Port Harcourt at Oloibiri (now in Bayelsa State) in 1956; initially a 50-50 profit sharing system was implemented between the company and the government. Until the late 1950s concessions on production and exploration continued to be the exclusive domain of the company, then known as Shell-British Petroleum. However, other firms became interested and by the early 1960s Mobil, Texaco, and Gulf had purchased concessions.^[3]

In October of 1960 Nigeria gained full independence from Britain with the British monarch continuing to preside as Head of State, but the country quickly altered its relationship with its former colonizers by declaring Nigeria a republic of three federated states (the Eastern, Western and Northern Regions). But the flaring of ethnic tensions assured that this new republic would be short-lived, as on January 15, 1966, a small group of army officers consisting mostly southeastern Igbos, staged a successful coup d'etat against the civilian government. This federal military government which assumed power under General Aguiyi-Ironsi, was unable to quiet ethnic tensions or produce a constitution acceptable to all sections of the country. In fact, its efforts to abolish the federal structure exacerbated the growing unrest and led to another coup, led by largely northern officers in July of the same year. This second coup established the regime of Major General Yakubu Gowon. Subsequently, the massacre of thousands of Igbo in the north prompted hundreds of thousands to return to the southeast, where increasingly strong Igbo secessionist sentiment emerged under the leadership of the Igbo military governor Lieutenant Colonel Chukwuemeka Odumegwu Ojukwu.

With tensions stoked between the Eastern region and Gowon's federal government, on 4-5 January 1967, in compliance with Ojukwu's desire to meet for talks only on neutral soil, a summit attended by Gowon, Ojukwu and other members of the Supreme Military Council was held at Aburi in Ghana, the stated purpose of which was to resolve all outstanding conflicts and establish Nigeria as a confederation of regions. The outcome of this summit was the Aburi Accord, the differing interpretations of which would soon cause Ojukwu to declare Biafran independence and plunge Nigeria into civil war.

[edit] Implications and causes of civil war (1966-1970)

See also: Biafra

See also: Nigerian Civil War

Igbo seccessionism arose in part from political isolation during the years following independence, as the Eastern Region increasingly found itself having to compete against both the Yoruba-dominated west and Hausa-dominated north. However, since the southeast encompassed most of the petroleum-rich Niger Delta, the prospect emerged of the Eastern Region gaining self-sufficiency and increasing prosperity. The exclusion of easterners from power caused many in the east to fear that oil revenues would be used to benefit areas in the north and west rather than their own. The desire to accrue profits from oil revenues combined with ethnic tensions acted as a catalyst for the Igbo-spearheaded secession. Additionally, despite his denials in later years, it appears that Ojukwu's insistence on secession at the time was heavily influenced by his knowledge of the extent of the area's oil reserves.

On top of scores of deaths, the war had a largely negative impact on the oil industry. Strife caused production of crude to drop significantly, particularly in Biafra. Total crude output decreased from 420,000 barrels per day (bpd) in 1966 at the start of the war, to only 140,000 bdp in 1968. Shell alone saw a drop from 367,000 bpd in 1966, to 43,000 in 1968. And in addition to concerns about production, oil companies began experiencing uncertainty as to the future of their investments depending on who prevailed in the war. This led to relations between oil companies and the federal government becoming strained, with the government at one point accusing the oil company Safrap (now TotalFinaElf, but Elf until 1974) of favoring Biafra and enlisting the aid of France for the Biafran cause. Shell, the other major holder of concessions in the southeast, was concerned but placated and limited politically by Britain's staunch support of the Nigerian government in the war effort.

Despite oil's prominent role in national affairs, up to this time, the Nigerian federal government had only limited involvement in the oil industry, and the government confined its financial involvement in the oil industry to taxes and royalties on the oil companies. The companies were subsequently able to set their own price on the petroleum they extracted, and dominated petroleum to such a point that laws governing the oil sector were having a negative effect on Nigerian interests. However, even during the conflict with Biafra would force changes to the relationship between federal government and the petroleum industry. Gowon's military government instituted the 1969 Petroleum Decree which dismantled the existing revenue allocation system that had divided revenue from oil taxes equally between federal and state government, instead favoring an allocation formula in which the federal government controlled the dispensation of revenues to the states.

After the loss of 300,000 lives, the war concluded in 1970 and resulted in a victory for the Nigerian state, as the secessionist regions were subsequently brought back into the Nigerian fold.^[3] However, the former Eastern Region had been split into two new states, Rivers and South-Eastern (now Cross River) in order to discourage lingering ideas of independence. Following the war, Delta peoples and their lands, with their vast petroleum reserves came to be seen by many in the Nigerian government as colonies of sorts. As a result these groups, notably the Igbo, have to an extent been marginalized in Nigerian politics since this time, whilst Nigeria's long line of military rulers have reaped immense profits from their land. Indeed, Nigeria has not had an Igbo head of state since the war's end.

[edit] Industry nationalization (1970-1979)

See also: Corruption in Nigeria

In May of 1971 the Nigerian federal government, then under the control of General Yakubu Gowon, nationalized the oil industry by creating the Nigerian National Oil Corporation via a decree. Following the war with Biafra, the government felt it necessary to secure and gain more control over the oil industry. Nationalization of the oil sector was also precipitated by Nigeria's desire to join OPEC, which required that member states acquire 51% stake and become increasingly involved in the oil sector. Although the Nigerian government had maintained involvement in the industry prior to 1971, this was accomplished mainly through business deals on concessions of the foreign firms in operation. The creation of the NNOC made government participation in the industry legally binding. The federal government would continue to consolidate its oil involvement throughout the next several decades.

However, it was during the years of Gowan and his successors Murtala Mohammed and Olusegun Obasanjo known officially as the Heads of the Federal Military Government of Nigeria,who ruled amidst the oil boom of the 1970s that the political economy of petroleum in Nigeria truly became characterized by endemic patronage and corruption by the political elites, which plagues the nation to this day. At both state and federal government levels, power and therefore wealth has typically been monopolized by select interest groups who maintain a strong tendency to 'look after their own' by financially rewarding their political supporters. At the state or community level this means that interest groups in power will reward and protect their own; this is typically based on ethnic/tribal or religious affiliation of the interest group. The heavy patronage based on tribal affiliation has fueled ethnic unrest and violence throughout Nigeria, but particularly in the Niger Delta states, where the stakes for control of the immense oil resources are very high. At the federal level, political elites have utilized patronage to consolidate power for the ruling government, not only by rewarding their political friends in the federal government, but also by paying off major interest groups at the state or tribal level in order to elicit their cooperation. Inevitably these financial favors are distributed unequally and inefficiently, resulting in concentration of wealth and power in the hands of a small minority.^[3] Nigeria is in fact ranked by the Corruption Perceptions Index as the sixth (ranked 152 out of 159 countries surveyed) most corrupt nation on Earth and maintains the second lowest ranking in Africa, ahead of only Chad.

Following the NNOC's genesis, the Nigerian government persisted in garnering control over oil revenues, in 1972 it declared that all property not currently owned by a foreign entity is legally the property of the government, which gained jurisdiction of the sale and allocation of concessions to foreign investment. The military regime oversaw the implementation of a number of other important milestones related to oil:

1974: Participation in oil industry by government increases to 55 percent.

1975: Decree 6 increases federal government share in oil sector to 80%, with only 20% going to states.

1976: First exploration and development venture by NNOC undertaken and drills to uncover commercial quantities of petroleum off-shore.

1978: Perhaps most importantly, the federal government created the Land Use Act which vested control over state lands in control of military governors appointed by the federal military regime, and eventually led to Section 40(3) of the 1979 constitution which declared all minerals, oil, natural gas, and natural resources found within the bounds of Nigeria to be legal property of the Nigerian federal government.^[6]

1979: In an effort to establish further control over the industry, the government merges and restructures the NNOC and the Ministry of Petroleum to form the Nigerian National Petroleum Corporation, an entity which would exert more power over the allocation and sale of concessions than the NNOC. By 1979, the NNPC had also gained 60 percent participation in the oil industry.

[edit] Attempted democracy and debt (1979-1983)

Despite the vast revenues accrued by Gowon and his heirs, the junta still managed to succumb to the demands of the civilian population, and in 1979 military head of state Olusegun Obasanjo handed over power to elected National Party of Nigeria (NPN) candidate Shehu Shagari. This event coincided with the declaration of Nigeria's Second Republic. At this juncture, the oil producing states of the Niger Delta were accounting for 82% of all federal government revenue but the population of these areas received very little compensation and demands for adequate reimbursement for the black gold extracted from their land could be heard at this time. Overall, petroleum accounted for 96% of all government external revenue but a mere 27% of the nation's GDP. However, the conversion to democracy would not improve the situation.

A 1982 Revenue Act implemented by the Shagari government would eventually be modified by yet another military regime in 1984 via Decree 36 which reduced government share of oil revenue from 80% to 55%. 32.5% go to states and 10% to local governments.^[7] The remaining 1.5% was earmarked as a special fund to develop oil producing areas, however, it was during the Shagari regime that corruption in Nigerian governance reached its zenith and capital flight out of Nigeria peaked, while the oil-producing peoples continued to receive little to no share of the oil profits Additionally, 1980 saw oil-generated revenues attain an all-time climax of US $24.9 billion but Nigeria still managed an international debt of $9 billion.

Shagari's NPN government was viewed by the majority of Nigerians as incorrigibly corrupt by the time the national elections of 1983 came about. Shagari and his subordinates steadily transformed Nigeria into a police state where Nigerian military and police forces were permitted to utilise force quite liberally in order to control the civilian population. Such repressive measures were employed to ensure victory in the forthcoming elections, and this outcome was achieved largely through the bankrupting of the federal government's treasury.^[8]

Another disturbing trend had also been gaining steam in Nigeria since the early 1970s: a steep drop in agricultural production correlating roughly with the rise in federal revenues from petroleum extraction. Whereas previously Nigeria had been the world's lead exporter of cocoa, production of this cash crop dropped by 43%, while productivity in other important income generators like rubber (29%), groundnuts (64%), and cotton (65%) plummeted as well between 1972 and 1983.^[6] The decline in agricultural production was not limited to cash crops amid the oil boom, and national output of staple foodstuffs fell. This situation contrasts to Nigeria in 1960 just after independence, when despite British underdevelopment, the nation was more or less self-sufficient in terms of food supply, while crops made up 97% of all revenue from exports. The drop in production was so substantial that by the early 1980s the NPN government was forced to implement a now notorious import license scheme which essentially involved Nigeria, for the first time in its history, importing basic food items. However, as Nigerian activist and Nobel Laureate Wole Soyinka asserts, "the import license scam that was used by the party as a reward and enticement for party loyalists and would-be supporters cost the nation billions of dollars...while food production in the country virtually ceased".^[8]

[edit] Return to military rule and electoral abortion (1983-1993)

For these reasons, seizure of by power by General Muhammadu Buhari a short time after the NPN government was fraudulently re-elected was initially perceived as a positive developement by civilians. Buhari charged out of the gate in December 1983, declaring himself Head of the Supreme Military Council of Nigeria, he condemned the civlian government's blatant corruption and instituted programs supposedly designed to eliminate the disease of corruption. However, these measures were largely transparent and the looting of federal coffers by Nigeria's rulers continued largely unabated,^[6] "as Shagari's officers - both within party and government - left the country, came in and out as they pleased, while Burahi's tribunal sentence opposition figures to spells of between a hundred and three hundred years in prison for every dubious kind of crime".^[8] The Buhari government neglected to punish even Shagari himself, a consistent trend in Nigerian's long line of dictariorial rulers, who almost universally been spared any kind of justice.^[8]

In 1985, another general, this time General Ibrahim Babangida, stole power and again alleged that his predecessors were corrupt violators of human rights and promised to rectify the situation, committing to a return to democracy by 1990. Nigeria had been saddled with a crushingly large international debt at this point. This was because, despite over 101 billion US dollars having been generated by the oil industry between 1958 and 1983,^[6] nearly all of these funds had been siphoned into the private bank accounts and the state sponsored pet projects maintained by the succession of Nigerian governmental elites.

Immediately prior to Babangida's rise to power, which is viewed by some as having been orchestrated by international oil and banking interests, the International Monetary Fund was exerting increasingly acute pressure on the Nigerian government to repay its massive debts, of which 44% of all federal revenue was already servicing.^[6] Therefore, it was unsurprising when Babangida implemented the IMF's Structural Adjustment Program in October 1986 in order to facilitate debt repayment. The SAP was extremely controversial while it was in effect between 1986 and 1988, because while it did permit Nigerian exports to become more competitive internationally and spurred a degree of economic growth, but the SAP also incurred a dramatic drop in real wages for the majority of Nigerian's. This combined with a major cuts to important public services incited public unrest so extreme that Babangida's Armed Forces Ruling Council was obliged to partially reverse the SAP initiatives and return to inflationary economic policies. Babagida's rule also oversaw, amongst other things, the annihilation of the Nigerian economic middle class, and the Nigerian's entry as a full-fledged member of the Organization of the Islamic Conference despite Muslims accounting for less than 50% of the Nigerian populace.

The 1980s military juntas conducted several attempted re-organisations of the NNPC to increase its efficiency. However, according to most sources by the early 1990s the NNPC was characterized by chronic inefficiency and waste. Red tape and poor organization are standard, with the NNPC being divided into several sub-entities which each fulfill a particular function. This is despite the NNPCs growing participation in the industry, including development and exploration of numerous off-shore wells. As a result, the functionality of the industry is dependent on foreign corporations, not the NNPC.^[3]

The sudden jump in oil prices caused by the First Gulf War in 1990 and 1991, as most researchers confirm, was at best squandered. The Babangida junta has been widely accused of "mismanaging" the oil windfall from the Gulf War price jump, which accounted for about $12.5 billion in revenues. Another alleges that the federal government siphoned off about $12.2 billion between 1988 and 1994 into private accounts or expenditures, "clandestinely undertaken while the country was openly reeling with a crushing external debt".^[6]

Under these circumstances, Babangida eventually allowed for nationwide elections on June 12, 1993. These elections, which were declared universally free and fair (at least in comparison to past elections) by all major international election monitors, and the eventual winner of the presidential race was the Chief M.K.O. Abiola [of the newly formed SDP]. However, the military regime cynically pronounced the election, in which fourteen million Nigerians participated, to be null and void due to "electoral irregularities". The Nigerian people took to the streets in large numbers to protest the election's annulment. As civil unrest continued, Babangida was forced to cede power to the caretaker government of Ernest Shonekan.

[edit] An environment of crisis (1993-present)

Shonekan's interim government would be short-lived, as on date, Babangida's former Chief of Army Staff and Minister of Defence Sani Abacha overthrew the caretaker regime and installed himself as Head of State. Popular opposition to the junta was widespread and public demonstrations were taking place on a regular basis. Immediately upon taking power, Abacha commenced the brutal repression of these subversive elements which would make his tenure notorious on a global basis.

Throughout the early 1990s such popular unrest grew steadily, particularly in the Niger Delta region, where various ethnic groups began demanding compensation for years of ecological damage as well as control over their land's oil resources. This unrest manifested itself at the outset as peaceful activist organisations that united their members on the basis of ethnicity.

One of the most prominent of these organisations to emerge in the region was the Movement for the Survival of the Ogoni People (MOSOP). The group declared that the Ogoni people, a small minority in Delta state of Nigeria, were slowly being annihilated as the arable terrain of their homeland (known as Ogoniland) was degraded by pollution from oil production by Chevron and primarily Shell.

Conflict in the Niger Delta arose in the early 1990s due to tensions between the foreign oil corporations, the Nigerian federal government, and a number of the Niger Delta's ethnic groups who felt they were being exploited, particularly minority groups like the Ogoni as well as the Ijaw in the late 1990s. Ethnic and political unrest has continued throughout the 1990s and persists as of 2006 despite the conversion to a more democratic, civilian federal system under the Obasanjo government in 1999; democracy has to some degree fan the flames as politicians seeking office may now employ militia groups to coerce voters and generally disrupt the electrion process. Competition for oil wealth has fuelled violence between innumerable ethnic groups, causing the militarization of nearly the entire region by ethnic militia groups as well as Nigerian military and police forces (notably the Nigerian Mobile Police). Victims of crimes are fearful of seeking justice for crimes committed against them because of growing "impunity from prosecution for individuals responsible for serious human rights abuses, [which] has created a devastating cycle of increasing conflict and violence". The regional and ethnic conflicts are so numerous that fully detailing each is impossible and impractical. However, there have been a number of major confrontations that deserve elaboration: see: Conflict in the Niger Delta

[edit] Joint Venture companies

All petroleum production and exploration is taken under the auspices of joint ventures between foreign multi-national corporations and the Nigerian federal government. This joint venture manifests itself as the Nigerian National Petroleum Corporation, a nationalized state corporation. All companies operating in Nigeria obey government operational rules and naming conventions (companies operating in Nigeria must legally be sub-entities of the main corporation, often incorporating "Nigeria" into its name). Joint ventures account for approximately 95 percent of all crude oil output, while local independent companies operating in marginal fields account for the remaining 5 percent. Additionally, the Nigerian constitution states that all minerals, oil, and gas legally belong to the federal government. Six companies are operating in Nigeria and are listed with their countries of origin (most of the following is extracted from a Human Rights Watch report):

Royal Dutch Shell (British/Dutch) 

Shell Petroleum Development Company of Nigeria Limited (SPDC), usually known simply as Shell Nigeria: A joint venture operated by Shell accounts for fifty percent of Nigerian's total oil production (899,000 barrels per day (bpd) in 1997) from more than eighty oil fields. The joint venture is composed of NNPC (55%), Shell (30%), TotalFinaElf (10%) and Agip (5%) and operates largely onshore on dry land or in the mangrove swamp in the Niger Delta. "The company has more than 100 producing oil fields, and a network of more than 6,000 kilometres of pipelines, flowing through 87 flowstations. SPDC operates 2 coastal oil export terminals". The Shell joint venture produces about 50 percent of Nigeria's total crude. Shell Nigeria owns concessions on four companies, they are: Shell Petroleum Development Company (SPDC), Shell Nigeria Exploration and Production Company (SNEPCO), Shell Nigeria Gas (SNG), Shell Nigeria Oil Products (SNOP), as well as holding a major stake in Nigeria Liquified Natural Gas (NLNG). Shell formerly operated alongside British Petroleum as Shell-BP, but BP has since sold all of its Nigerian concessions. Most of Shell's operations in Nigeria are conducted through the Shell Petroleum Development Company (SPDC).

Chevron (American) 

Chevron Nigeria Limited (CNL): A joint venture between NNPC (60%) and Chevron (40%) has in the past been the second largest producer (approximately 400,000 bpd), with fields located in the Warri region west of the Niger river and offshore in shallow water. It is reported to aim to increase production to 600,000 bpd.

Exxon-Mobil (American) 

Mobil Producing Nigeria Unlimited (MPNU): A joint venture between the NNPC (60%) and Exxon-Mobil (40%) operates in shallow water off Akwa Ibom state in the southeastern delta and averaged production of 632,000 bpd in 1997, making it the second largest producer, as against 543,000 pbd in 1996. Mobil also holds a 50% interest in a Production Sharing Contract for a deep water block further offshore, and is reported to plan to increase output to 900,000 bpd by 2000. Oil industry sources indicate that Mobil is likely to overtake Shell as the largest producer in Nigeria within the next five years, if current trends continue, mainly due to its offshore base allowing it refuge from the strife Shell has experienced onshore. It is headquartered in Aket and operates in Nigeria under the subsidiary of Mobil Producing Nigeria (MPN).

Agip (Italian) 

Nigerian Agip Oil Company Limited (NAOC): A joint venture operated by Agip and owned by the NNPC (60%), Agip (20%) and ConocoPhillips (20%) produces 150,000 bpd mostly from small onshore fields.

Total (French) 

Total Petroleum Nigeria Limited (TPNL): A joint venture between NNPC (60%) and Elf (now Total) produced approximately 125,000 bpd during 1997, both on and offshore. Elf and Mobil are in dispute over operational control of an offshore field with a production capacity of 90,000 bpd.

Texaco (now merged with Chevron) 

NNPC Texaco-Chevron Joint Venture (formerly Texaco Overseas Petroleum Company of Nigeria Unlimited): A joint venture operated by Texaco and owned by NNPC (60%), Texaco (20%) and Chevron (20%) currently produces about 60,000 bpd from five offshore fields.^[7]

[edit] Impact of oil industry on the environment

See also: Environmental issues in Nigeria

The Niger Delta is comprised of 70,000 square km of wetlands formed primarily by sediment deposition. Home to 20 million people and 40 different ethnic groups, this floodplain makes up 7.5% of Nigeria's total land mass. It is the largest wetland and maintains the third-largest drainage area in Africa. The Delta's environment can be broken down into four ecological zones: coastal barrier islands, mangrove swamp forests, freshwater swamps, and lowland rainforests. This incredibly well-endowed ecosystem, which contains one of the highest concentrations of biodiversity on the planet, in addition to supporting the abundant flora and fauna, arable terrain that can sustain a wide variety of crops, economic trees, and more species of freshwater fish than any ecosystem in West Africa. The region could experience a loss of 40% of its inhabitable terrain in the next thirty years because of extensive dam construction in the region. The carelessness of the oil industry has also precipitated this situation, which can perhaps be best encapsulated by a 1983 report issued by the NNPC in 1983, long perform popular unrest surfaced:

We witnessed the slow poisoning of the waters of this country and the destruction of vegetation and agricultural land by oil spills which occur during petroleum operations. But since the inception of the oil industry in Nigeria, more than twenty-five years ago, there has been no concerned and effective effort on the part of the government, let alone the oil operators, to control environmental problems associated with the industry.^[9]

[edit] Oil spills

See also: Oil spill

Oil spills in Nigeria occur due to a number of causes, they include: corrosion of pipelines and tankers (accounts for 50% of all spills), sabotage (28%), and oil production operations (21%, with 1% of the spills being accounted for by inadequate or non-functional production equipment. The largest contributor to the oil spill total, corrosion of pipes and tanks, is the rupturing or leaking of production infrastructures that are described as, "very old and lack regular inspection and maintenance".^[10] A reason that corrosion accounts for such a high percentage of all spills is that as a result of the small size of the oilfields in the Niger Delta, there is an extensive network of pipelines between the fields, as well as numerous small networks of flowlines—the narrow diameter pipes that carry oil from wellheads to flowstations—allowing many opportunities for leaks. In onshore areas, most pipelines and flowlines are laid above ground. Pipelines, which have an estimate life span of about fifteen years, are old and susceptible to corrosion. Many of the pipelines are as old as twenty to twenty-five years.^[7] Even Shell admits that "most of the facilities were constructed between the 1960s and early 1980s to the then prevailing standards. SPDC [Shell Petroleum and Development Company] would not build them that way today."^[11] Shell operates the Bonny Terminal in Rivers State, which has reportedly been in operation for forty years without a maintenance overhaul; its original lifespan was supposed to be twenty five years.^[12]

Sabotage is performed primarily through what is known as "bunkering",whereby the saboteur attempts to tap the pipeline, and in the process of extraction sometimes the pipeline is damaged or destroyed. Oil extracted in this manner can often be sold for cash compensation.

The Nigerian National Petroleum Corporation places the quantity of oil jettisoned into the environment yearly at 2,300 cubic meters with an average of 300 individual spills annually.^[7] However, because this amount does not take into "minor" spills, the World Bank argues that the true quantity of oil spilled into the environment could be as much as ten times the officially claimed amount.^[13] Among the largest individual spills include the blowout of a Texaco offshore station which in 1980 dumped an estimated 400,000 barrels of crude into the Gulf of Guinea and Shell's Forcados Terminal tank failure which produced a spillage estimated at 580,000 barrels.^[10] One source projects that the total amount oil in barrels spilled between 1960 and 1997 is upwards of 100 million barrels.^[13]

Oil spillage has a major impact on the ecosystem into which it is released. Immense tracts of the mangrove forests, which are especially susceptible to oil (this is mainly because it is stored in the soil and re-released annually with inundation), have been destroyed. An estimated 5-10% of Nigerian mangrove ecosystems have been wiped out either by settlement or oil. The rainforest which previously occupied some 7,400 sq. km. of land has disappeared as well.^[7]

Spills in populated areas often spread out over a wide area, taking out crops and aquacultures through contamination of the groundwater and soils. Though the consumption of dissolved oxygen by bacteria feeding on the spilled hydrocarbons also contributes to the death of fishes. In agricultural communities, often a year's supply of food can be destroyed by only a minor leak, debilitating the farmers and their families who depend on the land for their livelihood. Drinking water is also frequently contaminated, and a sheen of oil is visible in many localized bodies of water. If the drinking water is contaminated, even if no immediate health effects are apparent, the numerous hydrocarbons and chemicals present in oil are highly carcinogenic. Although, people often do manifest sickness following consumption of polluted water.

Offshore spills, which are usually much greater in scale, contaminate coastal environments and cause a decline in local fishing production.

The decline in ecologic sustainability parallels the increase in oil production since operations began four decades ago. Furthermore, operating companies such as Shell have made public proposals for increasing production significantly in the near future which, because of the careless nature of oil operations in the Delta, will cause the environment to grow increasingly uninhabitable.

[edit] Natural gas flaring

See also: Gas flare

Nigeria flares more natural gas associated with oil extraction than any other country on the planet, with estimates suggesting that of the 3.5 billion cubic feet of associated gas (AG) produced annually, 2.5 billion cubic feet, or about 70% is wasted via flaring. This equals about 25% of the UK's total natural gas consumption, and is the equivalent to 40% of the entire African continent's gas consumption in 2001. All statistical data associated with gas flaring is notoriously unreliable, but AG wasted during flaring is estimated to cost Nigeria US $2.5 billion on a yearly basis.^[14]

The reason for this practice, which is generally agreed world-wide to be wasteful both economically and environmentally, is that in order to maximize production of crude oil, the associated gas accompanying it is often burned off. Even though companies operating in Nigeria also harvest natural gas for commercial purposes, they prefer to extract natural gas from deposits where it is found in isolation, this isolated gas is known as non-associated gas. This occurs because it is costly to separate commercially viable associated gas from the oil. Therefore the AG found with oil is often burned off in order to increase crude production.

Historically, gas flaring began simultaneously with oil extraction in the 1960s by Shell-BP. Although, the British government subsequently acknowledged that the flaring was unacceptable, it was allowed to continue without any real efforts to change infrastructure and prevent the waste of the gas. This is in contrast to Britain's policies on gas flaring in their own territory, where gas flaring has been reduced to a minimum.

In fact, in western Europe 99% of associated gas is used or re-injected into the ground. Gas flaring is generally discouraged and condemned by the international community, as it contributes greatly to climate change. Which ironically can display its most devastating effects in developing countries like Nigeria, and particularly in the semi-arid Sahel regions of sub-Saharan Africa. The Niger Delta's low-lying plains are also quite vulnerable as they lie only a few meters above sea-level.

Gas flaring in Nigeria is also highly inefficient and releases large amounts methane, which has very high global warming potential. The methane is accompanied by the other major greenhouse gas, carbon dioxide, of which Nigeria was estimated to have emitted more than 34.38million tons in 2002, accounting for about 50% of all industrial emissions in the country and 30% of the total CO₂ emissions. As flaring in the west has been minimized, in Nigeria it has grown proportionally with oil production.^[15] The volume of associated gas produced and therefore burnt off, is directly linked to the amount of oil produced. So even though the percentage of gas flared from 92% in 1981 has fallen to around 70%, the overall amount of flared gas has increased from 2.1 billion cubic feet to 2.5 billion cubic feet.

It seems that the international community, the Nigerian government, and the oil corporations are all in agreement that gas flaring has a negative impact and needs to be stopped. However, in reality, efforts at stemming gas flaring have been slow to be implemented. The practice of gas flaring as it has been allowed since oil production began under British, has become set in stone, and would be costly to overhaul to reduce flaring. As a result, little is done by oil companies. This is in spite of the fact that gas flaring in Nigeria has technically been illegal since 1984 under section 3 of the "Associated Gas Reinjection Act". However, none of the regulations stipulated by this document have ever been made public.

OPEC and Shell, the biggest flarer of natural gas in Nigeria, alike claim that only 50% of all associated gas are burnt off via flaring at present. However, this statistic is accepted by few. The World Bank reported in 2004 that, "Nigeria currently flares 75% of the gas it produces."^[15] While other sources make similar projections, between 70 and 75% is the generally accepted percentage of gas flared.^[15]

Gas flares can have potentially harmful effects on the health and livelihood of the communities in their vicinity, as they release a variety of poisonous chemicals. Just some of combustion by-products include nitrogen dioxides, sulphur dioxide, volatile organic compounds like benzene, toluene, xylene and hydrogen sulfide, as well as carcinogens like benzapyrene and dioxin. Humans exposed to such substances can suffer from a variety of respiratory problems, which have been reported amongst many children in the Delta but have apparently gone uninvestigated. These chemicals can aggravate asthma, cause breathing difficulties and pain, as well as chronic bronchitis. Of particular note is that the chemical benzene, which is known to be emitted from gas flares in undocumented quantities, is well researched as being a causative agent for leukemia and other blood-related diseases. A study done by Climate Justice estimates that exposure to benzene would result in eight new cases of cancer yearly in Bayelsa State alone.^[15]

Often gas flares are located close to local communities, and regularly lack adequate fencing or protection for villagers who may risk nearing the tremendous heat of the flare in order to carry out their daily activities. Many of these communities claim that nearby flares cause acid rain which corrodes their homes and other local structures, many of which have metal roofing. However, whether or not the flares contribute to acid rain is debatable, as some independent studies conducted have found that the sulphur dioxide and nitrous oxide content of most flares was insufficient to establish a link between flaring and acid rain. Other studies from USEIA (U.S. Energy Information Administration) report that gas flaring is, "major contributor to air pollution and acid rain".

Flares which are often older and inefficient are rarely relocated away from villages, and are known to coat the land and communities in the area with soot and damage adjacent vegetation. Almost no vegetation can grow in the area directly surrounding the flare due to the tremendous heat it produces.^[7]

In November of 2005 a judgment by, "the Federal High Court of Nigeria ordered that gas flaring must stop in a Niger Delta community as it violates guaranteed constitutional rights to life and dignity. In a case brought against the Shell Petroleum Development Company of Nigeria (Shell), Justice C. V. Nwokorie ruled in Benin City that the damaging and wasteful practice of flaring cannot lawfully continue."

[edit] Sabotage

[edit] Impact of oil industry on human rights

[edit] Repression of protest and government corruption

[edit] Role of oil corporations

[edit] Poverty and chronic underdevelopment

[edit] References

1. ^ U.S. Energy Information Administration (U.S. EIA), “Nigeria Country Analysis Brief,” December 1997.
2. ^ Environmental Resources Managers Ltd, Niger Delta Environmental Survey Final Report Phase I; Volume I: Environmental and Socio-Economic Characteristics (Lagos: Niger Delta Environmental Survey, September 1997)
3. ^ ^{a b c d e} Nigeria: The Political Economy of Oil. ISBN 0-19-730014-6. (Khan, Ahmad)
4. ^ ^{a b c} Nigerian Crude and Gas Industry(NigeriaBusinessInfo.com)
5. ^ ^{a b} Natural Gas(Online Nigeria Portal)
6. ^ ^{a b c d e f g h i j} Where Vultures Feast. (Okonta and Douglas, 2001).
7. ^ ^{a b c d e f} The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria's Oil Producing Communities (Human Rights Watch, 1999)
8. ^ ^{a b c d} The Open Sore of a Continent. Soyinka, Wole.
9. ^ [Quoted in Greenpeace International's Shell Shocked,11](Greenpeace)
10. ^ ^{a b} Impacts of Oil spills along the Nigerian coast (The Association for Environmental Health and Sciences)
11. ^ Shell International Petroleum Company, Developments in Nigeria (London: March 1995)
12. ^ Nigeria to start rehabilitation of oil joint venture facilities(NigeriaBusinessInfo.com)
13. ^ ^{a b} Perception and Reality:Assessing Priorities for Sustainable Development in the Niger River Delta (Moffat and Lindén)
14. ^ Media Briefing: Gas flaring in Nigeria (Friends of the Earth)
15. ^ ^{a b c d} GAS FLARING IN NIGERIA: A HUMAN RIGHTS, ENVIRONMENTAL AND ECONOMIC MONSTROSITY (Climate Justice Programme and Environmental Rights Action/Friends of the Earth Nigeria)

[edit] External links

• John Ghazvinian's "The Curse of Oil" in the Virginia Quarterly Review
• Nigeria Oil Gas Online
• The Niger Delta Petroleum System: Niger Delta Province, Nigeria, Cameroon, and Equatorial Guinea, Africa, United States Geological Survey
• TIME article on the background to the 2006 increase in militant activity
• Remember Saro-Wiwa
• Amnesty International's latest report on oil and injustice in Nigeria
• Blood Oil: report on the Movement for the Emancipation of the Niger Delta by Sebastian Juger for Vanity Fair, Feb 2007
• Nigerian Oil -- "Curse of the Black Gold: Hope and Betrayal in the Niger Delta" -- article from National Geographic Magazine (February 2007)