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Nigeria 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.
Data as of June 1991
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