Oil in Nigeria

Acquisition of oil rights in Nigeria: Any place for host communities?



Acquisition of oil rights in Nigeria: Any place for host communities?

Introduction

Nigeria is a state that is gifted with sufficient natural resources which includes crude oil. The wells of oil are found particularly in the region of Niger Delta with many of those situated offshore. Oil was explored in Nigeria in early 1990s. Various companies from all around the world started exploration and discovery of oil in Nigeria. Issues started to arise regarding the ownership of oil sector of Nigeria. Various types of join operating agreements were created to deal with the issue. Various modes of acquisition of oil rights were created which included different types of licences granted to the applicants.Product sharing contracts were created as the main agreements that were contractual in nature to deal with the conflicting issue of ownership of oil in Nigeria.

When the oil industry was getting developed in Nigeria, environmental impacts and protection were not considered on the host communities. There were insufficient legitimate frameworks to tackle the problems of environment created by the exploration and exploitation of oil in the country. The lack of domestic infrastructure to deal with policy and legislative issues holds immense concern in the industry of oil. Besides that, majority of the domestic decrees and laws associated with the trade of crude oil in Nigeria are not up to the mark of international standards. It is a regular occurrence in Nigeria that oil spills take place. The resultant pollution due to the oil spills of the environment has caused immense problems for the local communities and ecosystem. Adequate measures need to be taken by the government of Nigeria to address this issue.

History and economic significance of oil in Nigeria

Oil is the most significant source of energy worldwide. The economy of Nigeria immensely depends on oil. Currently Nigeria`s oil reserves account for around about 90% of the total earnings from exports and above 70% for the revenue of federal government. The oil sector commenced with oil`s discovery in Nigeria. This sector consists of oil exploitation, exploration, production, refining, transportation and sale. World Oil Industry`s statistical review represents that above 90% of crude that is traded gets exported from developing or low income countries. The term of crude in this context means natural state of mineral oil before its refinement or treatment. Its treatment and refinement includes exclusion of foreign substances such as water.

The exploration for oil started in 1908 in Nigeria when Nigerian Bitumen Corporation, a German company, drilled 14 wells there. These wells are called Lagos state before ceasing operations with the start of World War I. Oil was not discovered in commercial quantity. As a consequence of the world war, the company did not continue its operation of oil discovery. Interest in possibility of discovery of oil in. Nigeria perked up again in 1937. In 1938, Petroleum Development Company of Nigeria got a license for oil exploration (OEL) for the whole of Nigeria from the British ...