When did Nigeria make its first crude oil export and approximately what quantity has been produced to date?
  Nigeria exported its first cargo of crude oil on 17 February 1958. Shell D’Arcy – predecessor to today’s Shell – two years earlier, drilled the first successful oil well in Oloibiri, Bayelsa State, near the country’s southern coast.
Nigeria’s production at the end of 2000 crossed the 20-billion barrel mark, of which 6.79 billion represented the production during the first two decades to 1978. At 12.4 billion barrels, production nearly doubled during the subsequent two decades, with cumulative production reaching 19.2 billion barrels at the end of 1998.

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Which companies dominate Nigeria’s upstream oil industry and is the trend likely to change?
   The Nigerian National Petroleum Corporation (NNPC), as non-operator and its joint venture partners, as operators dominate the country’s upstream oil industry. The joint venture partners consist of Nigerian subsidiaries of international majors, the top five, in terms of production being:

1. Shell Petroleum Development Company Ltd (SPDC) [produces 900,000 bpd]
2. Mobil Producing Nigeria Unlimited/Esso Petroleum [produce 500,000 bpd]
3. Chevron Nigeria Limited/Texaco Overseas [produce 465,000 bpd]
4. Nigerian Agip Oil Company Ltd [produces 150,000 bpd]
5. Elf Petroleum Limited/Total [produce 100,000 bpd]

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What is the role of the Nigerian National Petroleum Corporation?
  The Nigerian National Petroleum Corporation (NNPC) represents the country’s interest throughout the petroleum industry and plays a pivotal role in both the industry and the national economy. Upstream which gulps a huge proportion of the country’s investment, it typically holds 60 per cent share of the joint venture (JV) interest with multinational oil companies, with the exception of the NNPC/Shell/Elf/Agip JV where the holding is in the proportion of 55:30:10:5. The National Petroleum Investment & Management Services (NAPIMS) manages for NNPC its interest upstream. Nigeria invests approximately $3 billion upstream each year.
NNPC owns a few demonstrative subsidiaries such as the exploration and production outfit, National Petroleum Development Company (NPDC) producing in excess of 20,000 bpd and the country’s leading engineering outfit, National Engineering & Technical Company (NETCO). NNPC dominates the downstream sector, wholly owning all the country’s four refineries with a capacity of 45,000 bpd and three petrochemical plants. NNPC owns and operate through the Pipeline and Products Marketing Company (PPMC), an extensive 4,950 km pipeline network along with 20 depots.
Through Nigerian Gas Company (NGC), it owns an expanding 1,000 km network of gas pipelines. NNPC not only owns a 49 per cent interest in Nigeria LNG Limited, sponsors of Africa’s most ambitious project expansion but it also holds a 25 per cent stake in the West African Gas Pipeline. (WAGP) Project

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Are Nigeria’s investment and fiscal incentives sufficiently attractive?
  The fact that several new entrants are coming into the industry irrespective of the popular perception of the country’s risks, suggests that the incentives are good enough. Although Nigeria’s petroleum profit tax (PPT) is 85 per cent and royalty is 20 per cent (on-shore), joint venture partners, courtesy of the oil crisis of 1986, enjoy a substantial rebate – in the form of reduced government take – based on a memorandum of understanding (MOU). Operators obtain a “minimum guaranteed notional margin” once they kept “technical cost” within a certain range. The rebate increases with additional investment beyond a specified level. The uniquely Nigerian system has worked well.
However, many new discoveries will be produced under production sharing contracts (PSC), where the rules different from the joint venture. PSCs executed from July 1998 benefit from a flat 50 per cent tax allowance for qualifying expenditure for the accounting period in which the asset is first used. New PSC under the Year 2000 Licensing Round allow for 70:30 profit oil split between Contractor and NNPC for the first 350 million barrel, adjusted thereafter on a sliding scale. A study by an analyst of 45 contracts from around the world suggests that Nigeria is in the upper quartile of best performer. Contractors in Nigeria, according to the study, can achieve 20-25 per cent take at an oil price as low as $7.50/bbl

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How fast is the Nigerian gas industry likely to grow?
  Very fast, going by planned investment by the industry. Upstream, NNPC and the majors are spending several billions of dollars on “gas-gathering projects,” determined to beat the 2008 zero-gas flaring deadline and all new deepwater projects have to find commercial outlet for their gas to commence. Given its gas reserves of 159 trillion cubic feet of gas, placing it the 9th largest in the world and the massive flaring of associated gas, Nigeria’s potential for monetising the resource is very bright indeed.
Nigeria LNG Limited is the country’s largest consumer of natural gas and by 2006 treble its 1999 base capacity. Its $5.5 billion three-train Bonny Island plant has a capacity of approximately 9.1 million tonnes a year. Work has commenced on its $2.1 billion NLNGPlus (Trains 4 and 5 further expansion) project. After several years of negotiations, the $450 million West African Gas Pipeline (WAGP) project, which will extend an existing gas pipeline from Lagos to Takoradi in Ghana across two other countries, is beginning to record progress.
Other gas initiatives include the Brass LNG plant looking to producing 5 million tonnes a year of LNG by 2007, and the $1.2 billion Gas to Liquids (GTL) plant in Escravos with a capacity for 34,000 bpd, planned for completion 2005. NLNG is planning Train 6.

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How does one recognise a potential “scam” and is there any protection?
  Nigeria is an oil-rich, populous country but plagued with widespread poverty. It is common for some unemployed persons masquerading as connected persons in reputable organisations in the oil industry or as consultants or lawyers, to seek to con naive foreigners by communicating offers based on fictitious deals. A potential “scam” is usually not difficult to recognise. Typical features:

• The offer looks too good to be true
• It always contains a demand for advanced fee payment
• Usually takes the form of unsolicited communication from a doubtful source
• The telephone numbers indicated are usually only mobile phones (e.g. +234 8…)
• The advanced fee fraud (4-1-9) letters usually contain several inaccuracies, such as non-existent titles, misspellings and grammatical errors

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Can the Centre for Petroleum Information (CPI) provide the public due diligence service on prospective transactions?
  While the website of the Centre for Petroleum Information (CPI) hosts the information web pages of some major oil and gas players in Nigeria, it is not in a position to respond to specific inquires on their behalf. In particular, it does not provide any form of due diligence service for third party inquirers.
However, bona fide members of CPI wishing to research a specific subject should feel free to contact the Secretariat for assistance. Others wishing to benefit from such assistance should consider CPI membership or subscription for the print version of the CPI journal, Petroleum Business Digest.

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Which is the best way for the young Nigerian graduate to obtain a job in the country’s oil and gas industry?
  Many readers of this website have written requesting for job contacts. Unfortunately, that function is presently outside the scope of operation of the Centre for Petroleum Information (CPI).
The good news is that in the next 10 years Nigeria’s oil and gas industry will expand because of the development of new oil and gas discoveries and the execution of projects designed to utilise gas. The activities will create jobs but not in significant numbers, as the industry is technology-intensive. Each year the oil and gas industry recruits an estimated 300 to 500 graduates and only of the best quality. The chances are somewhat dimmer for university graduates holding degrees inferior to second class-lower or who are aged above 27.
The local dailies typically advertise and of the several thousands that apply, the industry recruits less than two per cent. Operating companies such as Shell and Mobil have training schemes that enhance the prospects of applicants. Those who excel, get jobs. To contact them visit their websites or write directly.

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What criteria do oil companies operating in Nigeria use in determining beneficiaries of tertiary education scholarships?
  The majors, Shell, Exxon-Mobil and Chevron-Texaco, in joint venture with the Nigerian National Petroleum Corporation (NNPC) provide a bulk of the tertiary education scholarships in selected disciplines. They periodically advertise in national dailies annually and stipulate their conditions and criteria.
Only a small proportion of applicants ultimately get the scholarships. The criteria appear skewed in favour of those from oil-producing areas, who do well in special selection aptitude tests and interviews. Applicants studying engineering, medicine and business-related courses stand a better chance.

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Can you explain the frequent protests, against fuel price hikes in Nigeria and how steeply have fuel prices risen over the last two decades?
  Nigerians see cheap fuel as a legitimate reward for Providence putting so much oil-subsidy removal,” in particular since1986, have pitched the impoverished populace against the authorities each time a new fuel price is announced. The anger stems from the frequency of the increases, the pass-through of local currency depreciation against hard currencies and the pervasive nature of energy costs in increasing economic hardships amid growing poverty.
The chart below shows how steeply petrol (gasoline) pump-prices have risen over the last two decades.

In 2004, the US dollar in Nigeria is 140 times its value 19 years ago. Fuel prices have risen faster: 268 times over the same period. Petrol pump price in Nigeria is 68 times higher than it was just 13 years ago in 1991. Until the exchange rate stabilises, which is dependent on the overall management of the oil-dependent economy, petrol prices are likely to rise. The ongoing privatisation is unlikely to reverse the trend.

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