Economic History of Nigeria – Oil Economy (Part II) Basic 6 History Lesson Note

Learning Objectives

By the end of the lesson, pupils should be able to:

• Name the major oil companies in Nigeria
• Discuss the benefits of crude oil production to Nigeria’s economy

Content

WEEK 8: MAJOR OIL COMPANIES IN NIGERIA

International Oil Companies (IOCs):

1. Shell Petroleum Development Company (SPDC)

• Parent Company: Royal Dutch Shell (Netherlands/UK)
• Established in Nigeria: 1936
• Operations: Onshore and offshore oil production
• Production: Largest oil producer in Nigeria
• Locations: Rivers, Bayelsa, Delta, Abia states
• Joint Venture Partner: NNPC (55%), Shell (30%), Elf (10%), Agip (5%)

2. Mobil Producing Nigeria Unlimited

• Parent Company: ExxonMobil (USA)
• Established in Nigeria: 1955
• Operations: Primarily offshore production
• Production: Second largest producer
• Locations: Akwa Ibom, Cross River states (offshore)
• Joint Venture Partner: NNPC (60%), Mobil (40%)

3. Chevron Nigeria Limited

• Parent Company: Chevron Corporation (USA)
• Established in Nigeria: 1961
• Operations: Onshore and offshore production
• Locations: Delta, Ondo states
• Joint Venture Partner: NNPC (60%), Chevron (40%)

4. Nigerian Agip Oil Company (NAOC)

• Parent Company: Eni (Italy)
• Established in Nigeria: 1962
• Operations: Onshore and offshore production
• Locations: Rivers, Bayelsa, Delta, Imo states
• Joint Venture Partner: NNPC (60%), Agip (20%), Phillips (20%)

5. Total Exploration and Production Nigeria

• Parent Company: TotalEnergies (France)
• Established in Nigeria: 1962
• Operations: Offshore deep-water production
• Locations: Offshore Lagos, Akwa Ibom
• Joint Venture Partner: NNPC (55%), Total (40%), Others (5%)

6. ConocoPhillips

• Parent Company: ConocoPhillips (USA)
• Operations: Deep-water offshore production
• Locations: Offshore Niger Delta

Indigenous Oil Companies:

1. Seplat Petroleum Development Company

• Ownership: Nigerian and international investors
• Operations: Onshore oil and gas production
• Locations: Delta, Edo states

2. Oando PLC

• Ownership: Nigerian company
• Operations: Oil production and marketing
• Activities: Upstream and downstream operations

3. Sahara Group

• Ownership: Nigerian company
• Operations: Oil trading and refining
• Activities: Petroleum products marketing

4. Forte Oil (Now Ardova)

• Ownership: Nigerian company
• Operations: Petroleum marketing and distribution
• Activities: Retail fuel stations

5. Conoil Producing

• Ownership: Nigerian company
• Operations: Oil production and marketing

Joint Venture Structure:

Nigeria operates primarily on Joint Venture basis:

• NNPC: Represents Nigerian government interests
• Foreign Partners: Provide technology and expertise
• Profit Sharing: Based on ownership percentages
• Risk Sharing: All parties share exploration risks

Production Sharing Contracts (PSC):

• Deep-water Operations: Mostly use PSC arrangements
• Government Share: Nigeria gets larger share of profits
• Risk: Foreign companies bear exploration risks
• Technology: Advanced deep-water technology required

WEEK 9: BENEFITS OF OIL TO NIGERIA’S ECONOMY

1. Government Revenue Generation

Primary Revenue Source:

• 80-90% of government revenue comes from oil
• Foreign Exchange: Major source of foreign currency
• Federal Budget: Oil revenues fund government operations
• Economic Planning: Enables large-scale development projects

Revenue Streams:

• Royalties: Payments from oil companies for extraction rights
• Profit Oil: Government’s share of oil production profits
• Petroleum Profit Tax: Taxes on oil company profits
• Import Duties: Taxes on petroleum equipment imports

2. Foreign Exchange Earnings

Export Revenues:

• 2-2.5 million barrels per day exported
• $50-100 billion annually in export revenues (varies with oil prices)
• Balance of Trade: Oil exports help balance import costs
• Currency Support: Supports naira exchange rate

Economic Stability:

• Foreign Reserves: Oil revenues build foreign currency reserves
• Import Capacity: Enables importation of essential goods
• International Trade: Facilitates international business transactions

3. Employment Opportunities

Direct Employment:

• Oil Companies: Thousands of jobs in exploration, production, refining
• NNPC: Government oil sector employment
• Service Companies: Supporting industries and services
• Technical Jobs: Engineers, geologists, technicians

Indirect Employment:

• Construction: Building oil facilities and infrastructure
• Transportation: Moving oil and equipment
• Security: Protecting oil installations
• Hospitality: Hotels and services for oil workers

Skill Development:

• Technical Training: Advanced technical skills development
• Management: Business and management skills
• International Exposure: Working with global companies
• Technology Transfer: Learning advanced technologies

4. Infrastructure Development

Transportation:

• Roads: Oil revenues funded major highway construction
• Airports: Modern airports built with oil money
• Seaports: Port development for oil export and general trade
• Railways: Some railway projects funded by oil revenues

Utilities:

• Electricity: Power projects funded by oil revenues
• Water Supply: Urban and rural water projects
• Telecommunications: Communication infrastructure development

Industrial Infrastructure:

• Refineries: Oil processing facilities
• Petrochemical Plants: Value-added processing facilities
• Storage Facilities: Tank farms and depots
• Pipelines: Oil and gas transportation networks

5. Economic Diversification Potential

Petrochemical Industry:

• Plastic Manufacturing: Using petroleum as raw material
• Chemical Production: Fertilizers, pharmaceuticals
• Synthetic Materials: Rubber, fibers, paints
• Industrial Chemicals: Various industrial applications

Gas Utilization:

• Power Generation: Natural gas for electricity production
• LNG Exports: Liquefied Natural Gas for export
• Domestic Gas: Cooking gas for households
• Industrial Use: Gas for cement, steel production

6. Regional Development

Niger Delta Development:

• Infrastructure Projects: Roads, bridges, schools, hospitals
• Economic Opportunities: Business and trade development
• Urban Growth: Cities like Port Harcourt, Warri developed
• Educational Institutions: Universities and technical schools

National Impact:

• Federal Projects: Oil revenues fund projects nationwide
• State Allocations: Oil revenues shared with all states
• Local Government: LGAs receive oil revenue allocations
• National Development: Major national projects funded

7. International Relations

Diplomatic Influence:

• OPEC Membership: Nigeria is influential OPEC member
• Regional Leadership: Oil wealth supports African leadership role
• International Partnerships: Energy partnerships with major countries
• Economic Diplomacy: Oil as tool for international relations

Global Recognition:

• Energy Security: Important supplier to global energy market
• Investment Destination: Attracts international investment
• Technology Access: Access to advanced oil technologies
• Financial Markets: Integration with global financial systems

8. Social Development Programs

Education:

• University Funding: Oil revenues support higher education
• Scholarship Programs: International scholarship opportunities
• Infrastructure: Schools and educational facilities
• Research: Petroleum engineering and related fields

Healthcare:

• Hospital Construction: Modern healthcare facilities
• Medical Equipment: Advanced medical technology
• Health Programs: Public health initiatives
• Medical Training: Training of medical professionals

9. Economic Multiplier Effects

Banking and Finance:

• Oil Money: Increases liquidity in banking system
• Credit Creation: Banks can lend more money
• Financial Services: Growth of financial sector
• Capital Markets: Development of stock and bond markets

Service Industries:

• Legal Services: Legal firms serving oil industry
• Consulting: Management and technical consulting
• Insurance: Insurance services for oil operations
• Logistics: Supply chain and logistics services

10. Technological Advancement

Knowledge Transfer:

• Advanced Technology: Access to cutting-edge oil technology
• Training Programs: Technical training and skill development
• Research and Development: Oil-related research activities
• Innovation: Local innovation in oil and gas sector

Industrial Development:

• Manufacturing: Oil-related manufacturing industries
• Engineering Services: Local engineering capabilities
• Fabrication: Local fabrication of oil equipment
• Maintenance: Technical maintenance capabilities

Activities

• Create a map showing locations of major oil companies in Nigeria
• Research project on one international oil company’s operations in Nigeria
• Calculate Nigeria’s potential oil revenue using current prices and production
• Discussion on how oil benefits reach ordinary Nigerians

Multiple Choice Questions

1. The largest oil producing company in Nigeria is: a) Mobil b) Shell c) Chevron d) Agip 
2. NNPC typically owns what percentage in joint ventures? a) 40-60% b) 50-70% c) 55-60% d) 30-50% 
3. What percentage of government revenue comes from oil? a) 60-70% b) 70-80% c) 80-90% d) 90-100% 
4. Nigeria exports approximately how many barrels of oil per day? a) 1-1.5 million b) 2-2.5 million c) 3-3.5 million d) 0.5-1 million 
5. Which company was the first to discover oil in Nigeria? a) Mobil b) Chevron c) Shell-BP d) Agip 

Homework

Interview an adult in your community about how Nigeria’s oil wealth has affected their life. Ask about: (1) Job opportunities, (2) Infrastructure in their area, (3) Education and healthcare, (4) Cost of fuel and transportation, (5) Their suggestions for better use of oil money. Write a report on your findings.