Nigerian Crude Oil And Gas

Brief Summary of the Nigerian Crude Oil and Gas Industry by the CEO Integrity Intercontinental Group.

Nigeria is rich in mineral wealth, with petroleum and natural gas being the country’s major mineral products. Nigeria’s economic growth primarily comes from the country’s oil sector.

An Introductory Letter By The Chairman and CEO of Integrity Intercontinental Group on the major investment issues of The Nigerian Oil and Gas Sector

On April 21, 2007, Nigeria held presidential elections, marking the first time in Nigeria’s history that the country passed control from one civilian government to another. During the 16 months preceding the election, militant activity in the Niger Delta (especially near Warri and Port Harcourt) has severely impacted Nigeria’s oil production potential by shutting-in an estimated 20 percent of total production. The Nigerian economy is heavily dependent on the oil sector, which accounts for 95 percent of the country’s total export revenues.

In 2008, Nigeria’s energy consumption mix was dominated by oil (58 percent), followed by natural gas (34 percent) and hydroelectricity (8 percent). Coal, nuclear and other renewables are currently not part of the country’s energy consumption mix. Between 1984-2008, the share of oil in Nigeria’s energy mix has decreased from 77 percent to 58 percent. Natural gas consumption increased from 18 percent to 34 percent. Hydroelectricity has seen a slight increase as well from 5 percent to 8 percent.

The Nigerian Economy: Peeping Out of the Woods

With a Gross National Product, GNP, of some $48 billion, the size of the Nigerian economy is undeniably small. Given a population of 150 million according to World Bank figures, the per capita income comes down to a paltry $310. Not much to get by with, evidently. The country’s infrastructure is down, power supply is epileptic, the roads are chaotic and queues at petrol stations are long-winding, though the country is among the largest producers of crude oil in the world.

And yet, scratch beneath the gloomy surface and the picture is a lot brighter. That goods and services are so terribly made – if at all – turn out to be both a curse and a tremendous opportunity. A curse for the Nigerians who have to trudge through life in such desperate straits, but opportunity for anyone who could produce the goods or services with a modicum of efficiency.

There in lie the vast opportunities and allures of the Nigerian economy. Whole swathes of the economy offer unbelievable opportunities for making good money. According to figures from the International Finance Corporation, IFC, the Nigerian stock market has consistently outperformed returns on investment in emerging markets in the past few years. In the informal sector – where, anyway, most of the economy is – returns are even much greater.

"According to figures from the IFC, the Nigerian Stock Market has constantly outperformed returns on investment in emerging markets in the past few years" That things can only get better is indicated by the economic moves of the new civilian government of President Goodluck Jonathan. After 15 years of rampaging generals who ruled – and ruined – the country, the new government seems to understand what needs to be done, and is making bold moves to do them. Cleaning the mess left behind by years of military pillage won’t be easy, but a credible campaign against corruption is being waged. The refineries are being repaired. The economy is being opened up, and foreign direct investment is starting to pour in. Privatization of the worst-run state firms is being pursued with relentlessness. This last point bears some emphasis. The current exercise, unlike some that went before it, and unlike in places like Russia, is seen as clean and transparent. There is a frenzy of competition from both local and foreign bidders to buy the companies being sold.

Besides the state firms being privatized, new ones, especially foreign ones are on a long queue to explore opportunities in wide areas: Enron in power, Citibank & Standard Chartered Bank in financial services and a whole lot of others in water, agro-allied, construction and, of course the flagship sector of oil and gas. Telecoms and IT need special mention because the country has one of the lowest telephone access per person in the world – less than 4 in every 1000 persons. With serious government commitment to a viable telecoms policy, it is expected that with so many people in need of phone lines, any investment in this area - and indeed many foreign telecoms giants are lining up – would be especially lucrative.

These companies bring much needed, but also much profitable services. Above all, they bring a verdict: that the Nigerian economy has a tremendously bright future.

Brief Background

Nigeria's oil industry is dominated by the National Oil Company, Nigerian National Petroleum Corporation, NNPC founded in 1977. It is the major partner in the upstream joint ventures with the ‘seven sisters’ or major multinational petroleum exploration and production companies. These are the largest and oldest in Nigeria – Shell Petroleum Development company – SPDC or better known as "Shell" others are: Mobil Producing Nigeria unlimited, Chevron Nigeria, Elf Petroleum Nigeria and the Nigerian Agip Oil company, NAOC & Affiliate, Agip Energy and Natural Resources, AENR.

The NNPC owns an average 57 per cent in these joint ventures (JV). Profits from the JV are shared in the same ratio. For the NNPC/Shell JV: share structure: NNPC 55%, Royal Dutch/Shell 30%; Elf 10% and Agip 5%. Until early 90's, NNPC held 75% in the JV. It sold off 20 per cent. 10% sold to Shell, 10% to Elf and 5% to Agip.

Chevron JV: NNPC 60%; Chevron 40%

Mobil JV: NNPC 60%; Mobil 40%

Elf JV:NNPC 60%; Elf 40% (France)

Nigerian Agip JV; NNPC 60%; Agip, (Italy) 40%

Nigeria is regarded as mainly a gas province with some oil.

Proven Gas reserves are put at 100 trillion cubic feet, TCF. Whereas proven oil reserves were 16 billion in 1991 and 20 billion in 1992, Nigeria has set a target of 25 to 30 billion proven crude oil reserves for 2012. Nigeria has seven sedimentary basins: Niger Delta, deep offshore Niger Delta; Benue Trough; Lake Chad; Sokoto, Anambra, and Dahomey (Benin). Niger Delta is a mature oil basin and is considered to be one of the most prolific oil bearing sedimentary basins in the world.

Its adjunct deep offshore basin was opened for exploration in the 1991 (second) licensing round. A frontier area, the Niger delta deep offshore is proving to be just as prolific. A big gusher – Agbami oil field was found (1991) there. It holds 2 billion barrels of proven crude oil-in-place. Nigeria produces over 2 million barrels of crude oil per day. Condensate Production by Mobil accounts for another 50,000 barrels per day.

Most of Nigeria’s current natural gas production of about 100 million standard cubic feet/day occurs as associated gas, i.e. produced along with crude oil. Since the 1960s, and until recently, all of this associated natural gas was flared. But with the recent commissioning of Nigerian LNG, in Bonny, started in 1999, some of this associated gas is processed into LNG for export. With the completion of the NLNG’s fifth train expected in 2010, 60 per cent of currently flared gas would be converted to liquefied natural gas.

Licensing Rounds

1st on February 26, 1970 the Nigerian government announced open bidding for 27 offshore acreages. 15 (OPLS) oil prospecting licenses were offered to: Niger petroleum company – Deminex (4) accidental (4) Japan Petroleum Co. (4) Nigeria oil Resources/Monsato (2) and Henry Stephens Westates (1). 12 OPLS remaining were reserved for the proposed Nigerian National Oil Co. NNOC, started in 1972, NNOC is the precursor of the present Nigerian National Petroleum Corporation, started in 1977.

The second licensing round was announced in 1991 when the then Babangida military regime offered 137 oil acreages for open, international competitive bidding. The acreages covered seven sedimentary basins – Niger Delta and its deep offshore, Benue Inland Trough; Anambra; Dahomey (Benin), Sokoto and Lake Chad.

1. Niger Delta
2. Deep offshore (Niger Delta)*
3. Benue Trough
4. Dahomey
5. Sokoto
6. Lake Chad *5-200 metres water depth

Nigerian Crude Types	Specific Gravity	Sulphur Content - (%)
Bonny light (sweet)	0.8398-37 api	0.14
Qua Iboe	0.8398-37 api	0.14
Escravos blend	0.8448-36 api	0.14
Brass river	0.8063-44 api	0.28
Forcados	0.8708-31 api	0.2
Pennington Anfan

Concession winners were:

Alfred James Nig. Limited OPL 30 2 Benue Basin
Amalgamated oil OPL 452 Niger Delta
Atlas Petroleum OPL 75 Niger Delta
British Petroleum/Statoil OPLS 213; 217 & 218
Cavendish Petroleum

Many of the concession winners were indigenous oil prospectors. Most of the acreages won by them were concessions relinquished by the multi-national oil companies, for reasons due to low oil reserve or unwillingness to develop concession.

Among the indigenous prospectors are Alfred James, owned by Oba Okunade Sijuawade, of Ife; Summit oil owned by now late Bashorun Moshood Abiola, Consolidated oil, owned by the US-based Nigerian multi-millionaire, Michael Adenuga Jnr.; Moncrief Oil, owned by Benin mulit-millionaire, Gabriel Igbinedion; Dubri oil owned by Iduimo Itsueli and Amni Petroleum.

The multinationals also came. Esso/Exxon staged a comeback, while Statoil, the Norwegian state oil company made first foray in strategic alliance with BP, the British oil company; and Conoco, the oil division of Dupont corp. Abacan resources, the Canadian energy company worked with Amni International and Express Pet & Gas Company as technical and financial partner.

Africa has over 360 oil fields accounts for 168. Sudan has about 300 million barrels reserves and there are smaller deposits in Central African Republic. Some oil finds are also reported in Niger, Chad, Ghana and the Cameroon (Bakassi area).

In 1991 estimated proven reserves of crude oil in Sub Saharan Africa was 21.7 billion barrels or 2.2 per cent of world reserves. About 79 per cent is located in Nigeria, while other notable oil provinces are in Angola and Gabon. By 1992, Nigeria had (7) seven sedimentary basins. 880 oil fields already discovered, whereas only 180 had been developed. In addition, there are several undeveloped marginal fields and large tar sand (bitumen) deposits, estimated at over 2 billion barrels of oil equivalent in Ondo and Ogun States.

Refining and Distribution

Nigeria’s total installed refining capacity is 445,000 barrels per day of crude oil, as at 1990 to date. On paper 300,000 thousand barrels per day of crude is allocated to local refining and consumption. But on average about 240,000 bbl/day is given to the local refineries, up till the mid-90s. The breakdown of refineries and lack of TAM – turn-around – maintenance between 96-98 under late General Abacha's regime may have reduced local processing of crude oil to about 75,000 bbls/day.

Refineries-Warri and Port Harcourt presently operate at 30% capacity. Kaduna refinery is still out, due to unsuccessful TAM, awarded to Total International in 1998.

In august 1976, NNPC begun an offshore crude processing scheme designed to complement local refining and reduce frequent product outages – Contractor’s to NNPC were: Shell Caracao; BP-Total consortium, Socap (elf) Stinnes, Interoil, Petrograd (brazil) Total international (France and Bermuda-based Basic Resources Services Ltd.

In 1991, NNPC undertook N1 billion refinery rehabilitation program (under Gen. Babangida's regime, with Professor Jibril Aminu as petroleum resources minister). NNPC also spends about N400 million per annum for TAM on the four refineries.

In the early 1990s – the NNPC also spent about N12 billion to upgrade part of existing petroleum products pipeline from 6" diameter to 12" (inch), and build a 3-phase pipeline system. It also spent N1 billion to revamp the Apapa Jetty, a strategic fuel loading point, and N1.5 billion on the expansion of the storage and handing capacity of the major fuel import receiving facility, the Atlas Cove Marine depot in Lagos.

Currently, the NNPC is also undertaking a maintenance exercise on Atlas Cove.

MAJOR OIL DEPOTS

Aba, Benin, Enugu, Ibadan, Gombe, Ilorin, Jos, Kaduna, Kano, Lagos (Ejigbo) Maiduguri, Makurdi, Mosimi, Ore Port Harcourt and Warri.

MAJOR OIL MARKETERS

National Oil PLC - (NOLCHEM)
Unipetrol Nigeria PLC
Elf oil Nigerian Limited
AP-African Petroleum PLC
Total Nigeria PLC
Agip Nigeria PLC
Mobil Oil Nigeria PLC
Oando PLC

Independent or Indigenous Oil Marketing Companies

These independent or Indigenous number over 350, spreading all over the country, from one station to fairly large ones.

Notable among them are:

Fowobi Oil
Ladegbuwa Oil
Eterna Oil PLC
Lenoil
Ibeto (Oil) Lubricants
Sea Petroleum and Gas

Kaduna Refinery & Petrochemical Company

This was refinery built and commissioned in 1988 with processing capacity of 150,000 barrels per day. It has adjoining petrochemical plant which can produce asphalt, benzene and heavy paraffin base oils, used in the manufacture of vehicular lubricants and oils. Under an exchange arrangement with Saudi Arabia about 28,000 barrels per day of Arabian light – which is an heavier crude is imported and processed for production of above stated non-conventionals. In turn, Saudi Arabia receives 59,000 bbl per day of Nigerian crude oil, Qua Iboe & Bonny Medium types.

Oso Condensate

Total reserves: 500 millions bbls owned by the NNPC/Mobil Joint venture. Came into production in 1993. Nigeria’s first and largest condensate field, it was discovered in 1964 at Oso, 56 kilometers offshore Akwa Ibom with reservoir 183 metres below the seabed. Developed at cost $850 million, Oso was financed with foreign loans, especially by IFC. Oso, produced 100,000 barrels per day initially, dropped to 60,000 bbls/day from1998. Condensate output is outside OPEC quota. Other financiers: Japan Exim $47 million, European Investment Bank, EIB; $65 million, total $330m to NNPC. IFC, $170m to Mobil, and US Exim $95 million to Mobil. NNPC equity $190m; Mobil $100m. Oso yields about $300 - $500 million per annum in tax & royalties to Nigeria.

Refineries:

Old Port Harcourt Refinery

60,000 barrels per day processing capacity. Built by Shell-BP in 1964. Taken over by the Nigerian government in 1977. Its Nigeria’s first refinery. Located in Elesa-Eleme, near Port Harcourt. Damaged by fire in 1988. Rehabilitated and put back in production in early to late 90s.

Warrri Refinery and Petrochemical Plan

Has Installed processing capacity of 125,000 barrels per day of crude. Adjoining petrochemical plant with production capacity for carbon black. Built in 1978 with initial capacity for 100,000 bbl. per day. De-bottlenecked in 1991 to increase processing capacity to 125,000 bbl/day. Original process plant supplied by technical/Snamprogetti believed to be defective. Result – frequent shutdowns and high running costs.

New Port Harcourt Refinery

Processing capacity is 150,000 barrels per day. Initially designed as an export refinery. Thus its location at the coastal village of Eleme, near the old Port Harcourt refinery. It is the most modern of Nigeria refineries and was commissioned in 1991.

Petroleum Products Marketing

Nigeria has a long history of oil or refined petroleum products marketing, dating back to seventy years – early 1930s when precursors of Shell and Mobil engaged in the distribution of petroleum products. The dominant brand of cooking oil or kerosene then was "sunflower." The domestic petroleum products market is dominated by the downstream arms of the ‘seven sisters’ or the multinational oil prospecting companies. National Oil (Shell), Mobil Oil, Elf, total Nigeria, Agip Nigeria, AP (BP), and Unipetrol.

Royal Dutch/shell owns 40 per cent equity in National Oil. Other shareholders are Nigerian government (through) NNPC 40%, 20% is held by the Nigerian public. Most of these companies have been indigenized. All the majors are quoted on the Nigerian Stock Exchange, with the exception of Elf oil, which is owned by private interest (Ibru organization and Elf Inc.)

The local fuels market is still largely regulated. Pump price of fuels such as PMS – Premium Motor Spirit – petrol, Kerosene, diesel, MP were fixed by government but now left to the forces of demand and supply to decide. In the past, the bulk of domestic fuels consumption was supplied by local refineries. But due to the parlous state of the refineries, the bulk of local fuel requirements is met by importation. Massive importation started from 1996 under the late General Abacha's regime.

In 1998, the erstwhile military regime of General Abdulsalam Abubakar moved towards deregulation – which the industry had always wanted, by allowing the oil marketing companies to import fuel directly. In the past, this was only done by the government through the NNPC. More so, as importation was unattractive to the majors due to the local fixed price regime.

The majors, as well as independents i.e. the small-to-medium-sized indigenous oil marketers began to import fuels directly following the new policy. At the time, this helped to stem the growing supply shortfalls, which had caused serious economic problems, and aggravated the country’s economic downturn. A typical scenario were fuel queues that stretched for miles at virtually in all parts of the country. But the respite was short lived. Whereas low international price of crude oil $9 – 12 per barrel at the time made fuel imports economic, rising crude oil prices in the following year (1999) made the oil marketing companies stop imports of fuels, particularly petrol, diesel and kerosene.

By the second half of 1999, the NNPC had become the major importer of fuels for domestic consumption, which it had to do for strategic reasons, to avoid a political backlash that may have security implications.

Speaking for the major oil companies, AP’s managing director at that time, Umar Abba-Gana said they were beginning to operate at a loss – if they are to import fuel at $21 per barrel of crude and sell at fixed local price of N20 per liter of petrol.

The Obasanjo administration also continued importation of fuels while attempting to complete the refurbishment and turn-around maintenance of local refineries. Obasanjo also increased pump price of fuels in February. Petrol from N20 to N22 per liter, diesel N19 to N21 per liter, kerosene however remained at N17 per liter.

The unilateral price increase by the President caused widespread protests and strikes, led mainly by the Nigerian Labor Congress and, eventually lead to the reduction in originally price changes by the NNPC. The corporation had proposed N30 per liter for petrol, before the reduction to N22 by negotiation between the NLC and government. Fuel prices have since increased to unbelievable prices at this time.

Gas Development

In specific term, Nigeria is more of a gas province than an oil one. Natural gas deposits out-weigh oil by far. Nigeria has an estimated 120 trillion cubic feet of gas reserves, about three times the size of oil reserves of 22 billion. Most of this occurs as associated gas i.e. gas occurring along with crude oil in the same reservoir.

Generally, little exploration for gas is done in Nigeria. Thus, current gas production of about 120,000 million standard cubic feet per daily is associated gas produced during oil production in the Niger Delta.

Some of this gas has been used by Shell to generate some electricity in the Niger Delta since the 70s. Some of it is used by the Power Holding Company Of Nigeria also known as National Electric Power Authority, NEPA, power plants at Ogorade, Afam, and Delta V1. And the 220 Mega watt Egbin power plant, near Lagos. Ogorode, Afam and Delta VI are fed from Sapele, Obigbo and Alakiri gas pipeline, while Egbin is supplied through an extended pipeline to Lagos.

In 1991, NEPA power plants consumed 75.5 per cent of the over 109,000 supplied by the Nigerian Gas Company, NGC. NGC is a subsidiary of the NNPC set-up to market the country’s produced gas locally. NGC buys the gas from the oil producing companies at agreed prices and then sells to its consumers.

The Nigerian Liquefied Natural Gas Company

NLNG, is another project that was started to utilize the nation’s abundant natural gas reserves, profitably. Nigerian LNG was first broached in the early 1960s, but remained on the drawing board until the late 1980s. The $3.8 billion NLNG sited on Bonny Island, several kilometers off Port Harcourt started production in august 1999.

Liquefied Natural gas is a way of compressing large volumes of gas that can be carried to markets thousands of kilometers away, via specially built ships. So far, NLNG capacity of 4.6 tons per annum has delivered over 60 cargoes to European buyers and sold 4 cargoes on the US spot market.

Another plan to utilize Nigerian gas economically is the proposed West Africa Pipeline WAGP, project. The Idea is to supply gas from Nigeria to neighboring West African countries – Benin, Ghana, Togo, and later Ivory Coast. Started in the early 1990s, the WAGP has been dogged by bilateral, multilateral problems between the countries involved. And of course financing problems but its progressing swiftly now.

Another plan is progressing now to supply gas directly to Europe from pipelines built from Nigeria, through Niger, through Algeria to Spain. The pipelines are being built even as I write this and is due to be completed soon.

Nigerian Gas Company

Started in 1980 with headquarters in Benin City, Edo state. In 1988, it sold 84,479 million standard cubic feet, mmsct of gas, valued at N130 million. 1990 it sold 95,396 mmscf valued at N260m. 1991 NGC sold 109, /012mmscf of gas at N517.4m. NGC has also been looking at ways to promote the use of compressed natural gas CNG to run vehicles in Nigeria.

Downstream - Fuel demand and consumption in Nigeria

1979, 2.3 million metric tons of petrol (pms) was consumed in Nigeria, according to NNPC records 1989, 4.4 MMT was consumed. In the same year, consumption of petrol grew by 12.8%. The NNPC puts annual growth rate of petroleum products consumption (and demand) at 12.4%. In 1993, NNPC calculated domestic need for petroleum products as requiring 270,000 barrels per day of crude oil to meet demand. But, according to the NNPC, as at 1994, we (Nigeria) consumed in excess of 360,000 barrels per day. It is believed that much of this "excess demand" is smuggled into neighboring ECOWAS states due to the comparatively cheaper prices of Nigeria’s petroleum products. This is one reason why the NNPC has been advocating for what it calls "appropriate pricing of petroleum products" since the late 80s.

Legislation Governing Petroleum Activities in Nigeria

Ever since the search for oil commenced, legislations have been passed to control various petroleum activities in the country through the Petroleum Inspectorate, an independent regulatory arm of NNPC. The Petroleum Inspectorate is a non-commercial division responsible for issuing permits and licenses for all activities connected with Petroleum.

Section 9 (2) of NNPC act 1977 makes provision for the Minister of Petroleum resources to delegate to the Chief Executive of the Inspectorate such powers conferred on the Minister under the petroleum Act 1969, the Pipeline Act or any other enactment as he may deem fit. The Petroleum Inspectorate is therefore principally responsible for the enforcement of the following Acts and Regulations:

Oil Pipeline act cap 145, 1956.	The Minerals Oil Safety Regulations 1963
The Oil Pipeline Act No. 1965.	Petroleum Regulation 1967.
Oil in Navigable waters 1968.	Oil terminal Dues act 1969.
Petroleum decree 1969.	Petroleum (Drilling and Production) Regulation 1969.
Petroleum (Refining) Regulations 1974.	Petroleum Production and distribution (Anti-Sabotage) Act 1975
Associated Gas Re-injection Act 1979	Associated Gas Re-Injection (continued flaring of Gas Crude Oil (Transportation Shipment) Regulations 1984
Associated Gas Re-Injection (Amendment) Decree 1985	Petroleum Products (Identification of Tankers) Regulations 1985.

To discharge some of its responsibilities, the Inspectorate requires the co-operation of Law Enforcement Agencies, the Nigerian Ports authority, Customs and Exercise Department and the Nigerian Navy. The objectives which the government seeks to achieve through the various petroleum laws and regulations can be broadly defined as follows:

Assertion of national sovereignty; Continuous exploration within the national territory, so as to have full assessment of the country’s petroleum potentials; Ensuring efficient petroleum operations, having regard to methods of operation and conservation; Satisfying domestic petroleum needs from domestic production and ensuring efficient distribution, marketing and pricing of petroleum products; Securing maximum government revenue and foreign exchange benefits from petroleum production; Obtaining the transfer of petroleum technology and the development of domestic technical expertise with the aim of exercising effective control over the petroleum industry; Protection of the environment from oil and gas pollution; Exercising the maximum possible national control over the petroleum so as to ensure that petroleum sector activities are consistent with national economic development plans and policies.

In the absence of an independent Petroleum Inspectorate, the Department of Petroleum resources, DPR, an arm of the Federal Ministry of Petroleum and Mineral Resources is presently vested with the authority of the body referred to here as the Petroleum Inspectorate.

A brief summary of the current and most significant petroleum legislations is presented as follows under appropriate headings.

Ownership Of Petrol

Under the Petroleum Act 1969, The entire ownership and control of all oil and gas in place within any land in Nigeria, under its territorial waters and continental shelf is vested in the state of Nigeria. The Constitution of the Federal republic of Nigeria 1979 further emphasized the state ownership in section 40 (3) which provides that "the entire property in and control of all mineral oils and natural gas in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall be vested in the government of the Federal Republic of Nigeria and shall be managed in such manner as may be established by law".

Pipelines

Oil Pipelines Act Cap 145,1958 of the Laws of the federation; Oil Pipelines Act 1965, No. 24. The Oil Pipelines Act of 1958 and updated in 1965 makes provisions for licenses to be granted for the establishment and maintenance of pipelines incidental and supplemental to oil fields and oil mining and for purposes ancillary to such pipelines. The Act provides, among other things, for the right and obligations of the holder of a license, payment of compensation for economic crops and property damaged, payment of survey fees and other miscellaneous matters.

Petroleum Production

The following legislations relate to the production of petroleum:

The Act vests all petroleum in place in the state. It provides for the granting of Oil Exploration Licenses, Oil Prospecting Licenses and Oil Mining Leases and Licenses to construct and operate refineries by the Minister of Petroleum Resources. The act gives the Minster power to control petroleum, petroleum products and pricing. The Act is the most comprehensive legislation on petroleum and gas in the country.

Petroleum (Drilling and Production) Regulations 1969 and its Amendment 1973.

These relate to Oil Exploration Licenses, Oil Prospecting Licenses and Oil Mining Leases. The regulation provides for the form of licenses and the right and powers of holders. It also provides for the obligations of leases and licenses, recruitment and training of Nigerians. Other regulations relate to commencement of exploration and drilling, field development, accounts and records, fees, rent and royalties.

Oil Exploration License (OEL)

A non-exclusive license and limited period, and the regulation size of an OEL is 5,000 sq. miles (12,959 sq. km).

Oil Prospecting License (OPL)

This confers exclusive rights of surface and subsurface exploration for petroleum in an area not more than 2,590 sq. km. (100 sq miles) in size for an initial period of three years with an option of renewal for a maximum of two years. The holder of an OPL has a right of petroleum won during prospecting operations, subjects to obligations imposed upon him under the Petroleum Profit act 1959.

Oil Mining Lease (OML)

This grants exclusive rights to explore, win, produce, transport and carry away petroleum from leased area subject to the Petroleum Act 1969 and any special terms and conditions imposed. The size of an OML as stipulated in the Regulations is 1,295 sq. km. (500sq. miles) and the specified duration is 20 years, while only the holder of an OPL is entitled to apply for an OML.

Fiscal Requirements:

Petroleum Profit Tax Act 1959

This is a principal legislation on Petroleum Profits Tax (PPT), with amendments in 1967, 1970, 1973, 1977 and 1979. It has now been consolidated into the main Act in the revised edition of the Laws of the Federation of Nigeria 1990 and cited as the Petroleum Profits Tax Act 1959, Cap 354, Laws of the Federation of Nigeria, 1990. The PPT imposes tax upon profits from petroleum proceeds in Nigeria to the tune of 85% with effect from 1st April, 1975. A reduced rate of 65.75% is payable within the first five years, allowing for all pre-production capitalized expenses to be fully amortized.

Exemption of Petroleum Operations from Companies Income Tax Act 1979 CITA, Cap 60, Laws of the Federation of Nigeria 1990

The profits for any company engaged in Petroleum operation as defined by the PPT Act 1959, shall be exempted from the tax imposed by CITA, as long as those profits are derived from such operations and liable to tax under that Act.

Royalty

Royalty is charged as a percentage of the official selling price (OSPs) of petroleum produced at the rates varying between 161.3 and 20% depending on whether the concession is on or offshore and on depth of water for offshore concession.

Memorandum of Understanding (MOU)

The Memorandum of understanding Agreement (MOU) was signed in January, 1986 between the Federal Government and each of the oil producing companies on incentives for encouraging investments in exploration and development activities and enhancing crude oil exports. Designed to guarantee to the oil companies a profit margin irrespective of market conditions, the MOU provided a minimum margin of $2 per barrel by January, 1986 and $2.30 from July, 1991,after Tax and Royalty, to the companies on the equity crude oil.

Associated Gas Re-Injection Act 1979 No.99

This Act, which is the only legislation so far on gas, makes it obligatory for every company producing oil in Nigeria to summit detailed plans for gas utilization. The Act also stipulates that no company engaged in production of oil shall after January 1, 1984 flare gas produced in association with oil without permission in writing from the Minister.

Associated Gas Re-Injection (Continued Flaring of Gas Regulations 1984)

In view of the limited domestic market for gas and the high cost associated with gas development, the oil companies could not embark on any gas development program. Since Government depends on oil production for her revenue, she had to review the 1979 gas Re-Injection Decree to enable the oil companies to produce oil. The Regulations set out the conditions for the issuance of Certificate by the Minister under Section 3 (2) of the Associated Gas Re-Injection Act 1979 for the continued flaring of gas in a particular field or fields by companies engaged in the production of oil and gas.

The Associated Gas Re-Injection (Amendment) Decree No. 7 of 1985

This Decree was promulgated with effect from 20th April, 1985 to deal the problems arising from the implementation of the associated Gas Re-Injection Act 1979. A new subsection 2 in the amended Decree was substituted for subsection 2 of section 3 of the 1979 Act. The 1985 Decree permits a company engaged in the production of oil and gas to continue to flare gas in a particular field or fields if the issues a certificate to that effect and if he is satisfied after January 1, 1984 that utilization or re-injection of the produced gas is not appropriate or feasible in the particular field or fields. The certificate is subject to such terms and conditions as the Minister may impose. The certificate may permit the company to continue to flare gas in particular field or fields if the company pays such sum as the Minister may from time to time prescribe for every 28.317 standard cubic meter of gas flared. The fee prescribed is eleven kobo per 28.317 standard cubic meter of gas flared. Payments shall be made in the same manner and subject to the same procedure as for the payment of royalties by companies engaged in the production of oil i.e. in foreign currency.

Oil Pollution Control Provision Under Existing Statues

The Statues listed below which deal with oil pollution are designed to prohibit or control the pollution of water, air and land and they also prescribe sanctions in the form of fines, imprisonment or damages to be enforced against persons or companies who infringe the provisions.

Petroleum Regulation 1967 Oil in Navigable Waters Act 1968 Oil in Navigable Waters Regulations 1968 Petroleum Act 1969 Petroleum (Drilling & Production) Regulations 1969 Petroleum (Drilling & Production) Amendment Regulations 1973 Petroleum Refining Regulations 1974; and Oil Pipelines Act 1956. Petroleum Product Pricing

The Petroleum Equalization Fund (Management Board etc.) Act 1975 establishes the Fund which is to be applied for the reimbursement of oil marketing companies for any losses suffered by them arising from the sale of petroleum products at uniform prices throughout the country. The prices are fixed by the Minister pursuant to Section 5 (1) of the Petroleum Act 1969 and is managed by a Management Board also established by the Act.

Oil Pipeline The Oil Pipelines Act Cap 145 of the laws of the Federation 1958 lays down penalties for any person who willfully hinders or obstruct any licenses from entering or taking possession or using any land comprised in the license or without lawful authority interferes with or causes damage to any oil pipeline. The Petroleum Production and Distribution Anti-Sabotage Act 1975 prescribes more severe penalties.

The Decree creates the offence of sabotage in respect of willful acts calculated to disrupt or interfere with the distribution of petroleum products. Offenders are to be tried by Military Tribunals to be constituted by the Head of the Federal Military government. Persons found guilty of the offence of sabotage are liable to death sentences or to imprisonment for 21 years. A stricter penalty of death by firing squad was provided under section 6 (2) (e) of the Special Tribunal (Miscellaneous offences) Decree No. 20 of 1984, which provides that "any person who willfully or maliciously obstructs, damages, destroy or otherwise tampers or interferes with the free flow of any crude or refined petroleum product through an oil pipeline shall on conviction be liable to suffer death by the firing squad".

Winners of the 2nd Bidding Round Concessions

NAME OF COMPANY	CONCESSION HELD	BASIN
ALFRED JAMES NIG. LTD.	OPL-302	BENIN
AMALGAMATED OIL	OPL-452	NIGER
ATLAS PETROLEUM	OPL-75	NIGER
BRITISH PETROLEUM./STATOIL	OPL-213,217,218	NIGER
CAVENDISH PETROLEUM	OPL-453,	NIGER
CHEVRON NIG.	OPL-801,805,810,820,812,818,822	BENUE
CHEVRON NIG.	OML-46-55,89-95,97	NIGER
CONOCO (DU PONT)	OPL-220	NIGER
CONSOLIDATED OIL LTD.	OPL-112,458	BENUE
DUBRI OIL	OML-96	NIGER
EXXON	OPL-209
ALLIED ENERGY	OPL-210
ELF NIG. LTD	OPL-447,93,95-97	NIGER
ELF NIG. LTD	OML-99,102	NIGER
ELF NIG. LTD	OPL-222,223,802,807	CHAD
ELF NIG. LTD	OMLS-56-59	CHAD
EXPRESS PET. & GAS CO.	OPL-74	NIGER
MOBIL PRODUCING	OPL-94,221	NIGER
MOBIL PRODUCING	OML-67-70	NIGER
MONCRIEF OIL	OPL-471	NIGER
NIG AGIP OIL CO.	OPL-228,221,316	NIGER
NIG AGIP OIL CO.	OPL-808,811,818	BENUE
NIG AGIP OIL CO.	823,824,829,830,836.	BENUE
NIG AGIP OIL CO.	OLL-60-63	NIGER
IPEC GENERAL OIL	OPL-304	BENIN
INKO PETROLEUM	OPL-224	NIGER
NIGUS	OPL-496	NIGER
NNPC/AERN	OPL-472	NIGER
NNPC/ASHLAND	OPL-90,98,118,225	NIGER
NNPC/(DES)	N/A	CHAD
NNPC/SUNLINK	OPL-474	NIGER
NOREAST	OPL-215	NIGER
NOREAST	OPL-840	BENUE
NOREAST	OPL-902	CHAD
NPDC	OPL-91,110	NIGER
NPDC	OML-64-66	NIGER
OPIC	OPL-208	NIGER
PACLANTIC	OPL-204	NIGER
PAN OCEAN	OML-98	NIGER
QUEEN PETROLEUM	OML-135	NIGER
SEAGULL	OPL-230	NIGER
SHELL	OPL-803,806,809	BENUE
SHELL	OPL-212,219	NIGER
SHELL	OML-1,4,5,7,11-46	NIGER
SHELL	71-74,76,77,79,81	NIGER
SOLGAS NIG.	OML-226	NIGER
SUMMIT OIL	SUMMIT OIL	NIGER
TEXACO	OPL-460	NIGER
TEXACO	OML-83-88	NIGER
ULTRAMAR ENERGY INTL.	OPL-227	NIGER
UNION SQ PETROGAS	OPL-201	NIGER
YINKA FOLAWIYO	OPL-309	BENUE

Crude Oil Export Terminals

BONNY: -Operator: Shell Petroleum Development
Location: About 560 km S.E of Lagos.
Loading Capacity: 6,500 T/H
22km of sea line with 2 single buoy moorings, for tankers
loading up to 300,000 – 230,000 DWTStorage Capacity: Not available

FORCADOS: -Operator: Shell Petroleum Development
Location: About 260 km S.E of Lagos.
Loading Capacity: 11,000 T/Hr
26 km sea line with 2 single buoy moorings for tankers loading up to 254,000 DWT
(Total storage capacity Bonny-Forcados: 13 million bbls.

ESCRAVOS: -Operator: Chevron Nigeria Limited
Location: About 220 km S.E. of Lagos
Loading Capacity: 3,750 T/Hr
30 km of sea line with 2 single buoy moorings for tanker, loading up to 350,00 DOT
Storage capacity: 3.6 million barrels

QUA IBO: -Operator: Mobil Producing
Location: About 650 km S.E. of Lagos
Loading Capacity: 3,750 T/Hr
21 km of sea line with 2 single buoy moorings for tankers loading up to 285,000 DWT

RASS -Operator: Nigerian Agip Oil Company, NAOC
Location: about 470 km S.E. of Lagos 26 km of sea line with 2 single buoy moorings for tankers
Loading up to 300,000 DWT
Storage Capacity: 3,558 million barrels

PENNINGTON: -Operator: Texaco (Overseas) Nigeria
Location: About 370 km S.E. of Lagos
Loading Capacity: 2,000 T/Hr
Tankers up to 250,000: Not Available

We sincerely hope that this information will lure you to invest in the greatest country in Africa and take advantage of the tremendous opportunities that exist in the Nigerian oil and gas sector. The truth of the matter is that in spite of the negative international publicity about the Nigerian economy and market, smart multibillion dollar companies are still investing in the Nigerian economy and making billions of hard core foreign exchange.

We guarantee you a fraud free environment when you use our consulting, equipment and licensing services to do business in the Nigerian crude oil and gas sectors.

Thanks
Anakwe Joseph Chimeleze
Chief Executive Officer/Chairman
ceo@nigeriancrudeoilandgas.com

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