Oil and Gas
Nigeria's first oil refinery, at Alesa Eleme near Port Harcourt, began operations in late 1965 with a capacity of 38,000 barrels per day, enough to meet domestic requirements at the time. The refinery expanded production to 60,000 barrels per day after the civil war but failed to satisfy the demands of a rapidly growing economy. An additional refinery, delayed by political maneuvering over its location, was constructed at Warri, opening in 1978 with a capacity of 100,000 barrels per day. This plant was entirely owned by a parastatal, the Nigerian National Petroleum Company (NNPC), which starting in 1979 also held an 80 percent interest in the earlier plant. Technical problems and shutdowns for routine maintenance reduced production, and the combined total of petroleum processed by the two plants in 1979 averaged 89,000 barrels per day--about 83 percent of the domestic requirement.
In the late 1970s and early 1980s, the NNPC had substantial amounts of oil refined abroad (mostly by Shell) to make up the shortfall, and some oil was also processed in Cameroon, Ghana, and Ivory Coast. In October 1980, a third refinery, with a capacity of 100,000 barrels per day, began operations at Kaduna, but did not become fully productive until the mid-1980s. A fourth refinery was completed in March 1989 at Alesa Eleme, increasing Nigeria's refining capacity to 445,000 barrels per day. Domestic petroleum demand stood at 250,000 barrels per day, so a portion of the output of the four refineries could now be exported. However, by the early 1990s gasoline output was sufficiently short of the growing domestic demand to require that the NNPC still refine some gasoline abroad.
In 1988, about 96 percent of the oil Nigeria produced came from companies in which the NNPC held at least 60 percent of the equity. The NNPC also was responsible for 75 percent of total investment in petroleum. In the late 1980s, the major Western oil companies exploring oil resources in Nigeria (primarily in midwestern, southeastern, and nearby offshore wells) were (in descending order of importance) Shell, Chevron, Mobil, Agip, Elf Aquitaine, Phillips, Texaco, and Ashland. In 1985-88, 11 percent of all extracted oil (about 66 percent of domestic requirements) was refined in Nigerian refineries, where the NNPC owned majority equity shares.
From 1974 to 1981, while real oil prices remained high, lending to major oil exporting countries, such as Nigeria, was considered very safe. Indeed, Nigeria did not borrow extensively abroad until 1978, when a fall in the price of oil required Lagos to borrow US$16 million on world capital markets. Thereafter, Nigeria continued international borrowing for an ambitious investment program, anticipating an oil-price recovery. The world's sixth largest oil exporter and the leader in oil exports in sub-Saharan Africa, Nigeria nonetheless experienced an external trade surplus only from 1973 to 1975 and 1979 to 1980, during two oil price peaks, and in the late 1980s, when debtservicing burdens forced import reductions, especially in services.
Besides oil, Nigeria had substantial reserves of natural gas. Although the consumption of natural gas increased steadily in the late 1970s and 1980s, and in 1990 constituted more than 20 percent of Nigeria's total energy from commercial sources, the quantity of gas used was only a fraction of what was available. In 1988, with the largest natural gas reserves in Africa, Nigeria produced 21.2 billion cubic meters per day, with 2.9 billion cubic meters used by the National Electric Power Authority (NEPA) and other domestic customers, 2.6 billion cubic meters used by foreign oil companies, and 15.7 billion cubic meters (77 percent) wasted through flaring. Small amounts of gas were also consumed by petroleum producers to furnish power for their own operations and as fuel for some equipment. Domestically, there remained a large potential market for bottled liquid petroleum gas (LPG), which was produced primarily at the Kaduna refinery.
In the early 19900, Nigeria was undertaking a major project to market liquefied natural gas (LNG) (instead of flaring gas produced in the oil fields) by building a gas liquefaction plant on the Bonny River. Four companies signed an agreement in May 1989 to implementthis plan: NNPC (60 percent share)), Shell (20 percent), Agip (Azienda generale italiana dei petroli--10 percent), and Elf Aquitaine (10 percent), with plant construction scheduled to begin in 1991. Other aspects of the project involved Nigerian government construction of gas pipelines for distribution to domestic, residential, and commercial users and a supply of gas to the NNPC chemical complex at Port Harcourt. Much of the gas was intended for export, however, and the first LNG tanker was launched in October 19900 through the cooperative efforts of Nigeria and Japan.
|Country Studies main page | Nigeria Country Studies main page|