THE SATE OF THE OIL AND GAS INDUSTRY IN NIGERIA

The 15^th January 1956 discovery of crude oil at Oloibiri, Bayelsa state and many other sites years later, changed the economic status of Nigeria, it ushered in a new and abundant source of income for the nation and gave birth to the oil and gas industry. Over the years, since the discovery of crude

oil, many events have shaped the industry which has grown admits challenges to become the biggest in Africa. It has evolved with the return of democracy 16 years ago, into an industry that can actually provide development that equals the huge revenue it generates for the nation.

Today information from the Ministry of Petroleum shows that Nigeria has a total 159 oil fields and 1481 wells, produces an average of 2.3 million barrels of crude oil every day.  The oil and gas industry generates 98 % of all external revenue, it also contributes about 95 % of foreign exchange earnings. 67% of the total revenue for budget implementation is generated by the sale of oil and gas, the industry accounts or 4% of Nigeria’s GDP. It is estimated that Nigeria has in reserves 2.6billion barrels of crude and 187 trillion cubic feet of natural gas which is produced and managed by the Nigeria Liquefied Natural Gas Company,

The oil and gas industry in Nigeria generates huge amounts of revenue for the government; these monies have however not translated into physical development and welfare of its people. It is believed that the industry can do much better if managed more properly. Issues ranging from corruption, mismanagement, waste, lack of proper policies and legislature or their implementation, oil theft, pollution, local content deficit, lack of infrastructure and good business environment have continued to plague the industry. The issue of Marginalization and corruption in the Niger delta, where 78 of the 159 oil fields are located has been fingered as the cause of illegal bunkery, civil unrest, kidnappings and militancy which in turn affects production operations and output. With alternative sources of energy being developed by advanced nations resulting in a drop in oil prices, these issues that have troubled the industry need to be addressed to optimize its performance. The state of the industry as at today is defined by these issues.

Policies and Legislation

The Nigerian national petroleum corporation oversees all petroleum exploration and production. The federal government through the NNPC and legislation regulates the activities of the industry towards business efficiency. So far legislation and policies in the industry leave much to be desired, loop holes in policies and legislation have created many problems and uncertainties, key players in the industry complain of government interference, lack of regulatory compliance and due process. Poor implementation of available policies have caused bottle necks and resulted in poor operational standard on the side of the corporations. The much discussed petroleum industry bill (PIB) expected to address issues of local content, onshore operations, and tax is also a  controversy as stakeholders have expressed different opinions on their expectations and  its  effect when passed.

Corruption and Fraud

Today the oil and gas sector can hardly be discussed without the mention of corruption. It takes many forms, some of them include diversion of funds, oil theft, bribes and subsidy fraud . Many committees have been set u by many governments to probe several cases of high corruption in the industry. Corruption has been identified as the biggest challenge in the sector and is responsible for creating the disconnect between funds generated and development, giving rise to many ugly situations especially in the Niger delta. Nigeria loses billions yearly to oil theft, It is however expected that with better reforms, more stringent anti corruption laws and prosecution of culprits, corruption in the industry can be arrested.

Environmental and Safety Issues

In the oil and gas industry the need for strict adherence to environmental and safety practices is key. Oil spills, pollution and accidents in the industry have been a serious issue. Government estimates say about 760 spills have occurred from 1970 to 2014. The effect of spillage on the environment and livelihood of its inhabitants and the business is massive. Spillages have been the reason for many legal battles and protests. Oil spillage is mostly caused by sabotage, exploration operations and leakages due to corrosion. Gas flaring which is presently an environmental challenge is being curbed by gas to liquid initiatives.

Finally the benefits that can be derived from a healthy and efficient oil and gas sector are beyond imagination, there is hope even amidst drop in oil prices, that the industry can continue to grow, but government and all stakeholders must properly address all issues that continue to hinder optimal performance, The PIB must be structured in a way that it creates an enabling environment for smooth business. The subsidy regime that has been marred by corruption must be ended and local refining of crude re-initiated. Local content deficit, the diversification of the economy and need for alternative sources of energy must inform future projections and policies.