Nigeria is the largest oil and gas producer in Africa. Crude oil from the Niger Delta basin mostly comes in two types: light, and comparatively heavy – the lighter crude has API gravity of approximately 36 while the heavier crude has API gravity range 20–25. Both types are paraffinic and low in sulfur. Nigeria's economy and budget have been largely supported from income and revenues generated from the petroleum industry since 1960. Statistics as at February 2021 show that the Nigerian oil sector contributes to about 9% of the GDP of the nation.

The need for holistic reforms in the petroleum industry, ease of doing business, encouragement of local content in the industry birthed the Petroleum Industry Bill, introduced by the Goodluck Jonathan administration on 18 July 2008.

History of oil exploration

The history of oil exploration in Nigeria goes back to 1903, when the Nigerian Bitumen Corporation conducted exploratory work in the country. At the onset of World War I, the firm's operations were stopped. Due to lack of technological and financial resources of small oil companies, large and strong other oil companies took over the exploration of commercial oil in the country. Thereafter, licenses were given to D'Arcy Exploration Company and Whitehall Petroleum, but neither company found oil of commercial value and they returned their licenses in 1923.Frynas, J. G. (1999). Oil in Nigeria: Conflict and Litigation Between Oil Companies and Village Communities. Münster: Lit Verlag. A new license covering was given to Shell D'arcy Petroleum Development Company of Nigeria, a consortium of Shell and BP (then known as Anglo-Iranian). The company began exploratory work in 1937.

The association was granted license to explore oil all over the territory of Nigeria but, the acreage allotted to the company in the original license was reduced in 1951 and then, between 1955 and 1957. Drilling activities started in 1951 with the first test well drilled in Owerri area. Oil was discovered in non-commercial quantities at Akata, near Eket in 1953. Prior to the Akata find, the company had spent around £6 million on exploratory activities in the country. In the pursuit of commercially available petroleum, Shell-BP found oil in Oloibiri, Nigeria, in 1956. Other important oil wells discovered during the period were Afam and Bomu in Ogoni territory. Production of crude oil began in 1957, and in 1960, a total of 847,000 tonnes of crude oil was exported. Towards the end of the 1950s, non-British firms were granted license to explore for oil: Mobil in 1955, Tenneco in 1960, Gulf Oil, later Chevron in 1961, Agip in 1962, and Elf in 1962. Prior to the discovery of oil, Nigeria (like many other African countries) strongly relied on agricultural exports to supply its economy. However, after nearly 50 years searching for oil in the country, Shell-BP discovered oil at Oloibiri in the Niger Delta. The first oil field began production in 1958. Retrieved 26 November 2012

After that, the economy of Nigeria might have been expected to experience strong growth. However, competition for the profits from oil, coupled with the government keeping almost all of the profits for themselves, left little economic benefit for the people. In one interview with locals who were young at the time of oil discover, the blame was placed largely on the government and the greed of bureaucrats:

"I don't only blame the whites that came here, what about the government? People in the government get nearly all the money from the economy."

Many citizens of Nigeria believe that they have not been able to experience the economic benefits derived from oil extraction in Nigeria. In large part due to Nigerian government officials remaining majority shareholders in the profits created by the production of Nigerian oil, leading to government capturing of nearly all oil production, and citizens not seeing socio-economic benefits.

The president of Nigeria as of 2023, Bola Tinubu, has taken steps to privatize the oil and gas industry in Nigeria. Decades of government ownership and control of the industry left the people at large impoverished and unable to experience any of the economic gain related to oil and gas exploration and extraction, Tinubu hopes that privatization and free markets will allow for greater equity in the space that has been rife with corruption since the 1950s in Nigeria when petroleum products were first discovered.

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 14% 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 United States Energy Information Administration (EIA) at between , U.S. Energy Information Administration (U.S. EIA), "Nigeria Country Analysis Brief", December 1997. but other sources claim that there could be as much as . Its reserves make Nigeria the tenth most petroleum-rich nation and by far, the most affluent in Africa. In mid-2001, its crude oil production was averaging around per day. It is expected that the industry will continue to be profitable based on an average benchmark oil price of $85-$90 per barrel.http://www.oilandgascouncil.com/expert_insight_articles/review-nigeria-oil-gas-industry

Nearly all of the country's primary reserves are concentrated in around the delta of the Niger River, but offshore 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. Unlike most of the other OPEC countries. The reason for Nigeria's relative unproductivity is primarily OPEC's regulations on production, to regulate prices at the international market. More recently, production has been disrupted intermittently by the protests of the Niger Delta's inhabitants, who feel they are being exploited.

Nigeria has a total of 159 oil fields and 1481 wells in operation according to the Department of Petroleum Resources.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) 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 in 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.Nigeria: The Political Economy of Oil (Khan, Ahmad)

As a result of the numerous small fields, an extensive and well-developed pipeline network has been engineered to transport the crude oil. Also because of the lack of highly productive fields, money from the jointly operated (with the federal government) companies is constantly directed towards petroleum exploration and production.

Nigeria's petroleum is classified mostly as "light" and "sweet", as the oil is largely free of sulfur. Nigeria is the largest producer of sweet oil in OPEC. This sweet oil is similar in composition to the petroleum extracted from the 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 2010, Nigeria provided about 10% of the United States' oil imports and ranked as the fifth-largest source for oil imports in the U.S. However, Nigeria ceased exports to the U.S. in July 2014 due to increasing competition from U.S. domestic oil production, itself the result of the massive growth of the oil shale industry. India is the largest consumer of Nigerian oil as of 2021.

There are six petroleum export terminals in the country. Shell owns two, while Mobil, Chevron, Texaco, and Agip which is currently operated by Oando after being sold by the former own one each. Shell also owns the Forcados Terminal, which is capable of storing of crude oil in conjunction with the nearby Bonny Terminal. Mobil operates primarily out of the Qua Iboe Terminal in Akwa Ibom State, while Chevron owns the Escravos Terminal located in Delta State and has a storage capacity of . Agip operates the Brass Terminal in Brass, a town southwest of Port Harcourt and has a storage capacity of . Texaco operates the Pennington Terminal.Nigerian Crude and Gas Industry (NigeriaBusinessInfo.com)

Offshore As of 2005, oil companies in Africa investigated offshore production as an alternative area of production. Deepwater production mainly involved underwater drilling that exists or more below the surface of the water to expand the possible sources for finding new oil reserves. As of 2005, 50% more oil could be extracted through deep water drilling, than before. In 2003, the amount of oil extracted from Nigeria was expected to expand from to in 2010.

Deepwater oil production is less vulnerable to disturbance by local militant attacks and seizures, due to civil conflicts, and sabotage. These advancements offer more resources and alternatives to extract the oil from the Niger Delta, with less exposure to conflict versus the operations on land. As of 2014, an open-air market for illegal crude oil operates off the Niger Delta, called the Togo Triangle.

As of 2021, Angola and Nigeria were the largest oil producers in Africa. In Nigeria, the deepwater sector still has a large avenue to expand and develop. The Agbami oilfields hit full production in 2005, at a day. Operated by Chevron's Star Deep and a company called Famfa, Agbami is only one offshore concession; there are others named Akpo, Bonga and Erha.

Natural gas Natural gas reserves are well over . The gas reserves are three times as substantial as the crude oil reserves. Much of Nigeria's natural gas is flared off.Natural Gas(Online Nigeria Portal) The biggest natural gas initiative is the Nigerian Liquified Natural Gas Company, which is operated jointly by several companies and the states. It began exploration and production in 1999. In 2008, the government prepared a Gas Master Plan that was intended to promote natural gas production and encourage the supply of natural gas to domestic power stations so as to help alleviate the country's electricity shortages.(corporate-nigeria.com) An export pipeline, the West African Gas Pipeline (WAGP), has encountered numerous setbacks. The pipeline allows for transportation of natural gas to Benin, Ghana, and Togo. There are plans for an African Atlantic Gas Pipeline to extend the WAGP to Morocco and for a Trans-Saharan Gas Pipeline to Algeria.

Downstream A decade from 1979 to 1989, motor spirit consumption in Nigeria increased from 2.3 million metric tons (MMT) to 4.4 MMT, an average annual increase of 7.5%. In 1989, motor spirit consumption grew by 12.8%. Nigeria's total petroleum refining capacity currently is per day, however, only per day was allotted during the 1990s. Subsequently, crude oil production for refineries was reduced further to as little as per day, during the regime of Sanni Abacha. There are four major oil refineries: the Warri Refining and Petrochemicals Company plant, which can process of crude per day, the New Port Harcourt Refinery, which can produce per day (there is also an 'Old' Port Harcourt Refinery with negligible production), as well as the now defunct Kaduna Refinery. The Port Harcourt and Warri Refineries both operate at only 30% capacity. The Dangote Refinery, expected to open during the fourth quarter of 2022 will have a daily refining capacity of , increasing Nigeria's refining capacity to over per day.

History and politics