Oil Is Discovered in Nigeria Summary

  • Last updated on November 10, 2022

As the importance of oil as a fuel grew in the twentieth century, the British government tried to find oil sources within the British Empire. An important source was found in the Niger Delta region of Nigeria. The discovery of a large, commercial source of oil in Southern Nigeria had a significant impact on the development of Nigeria and its people.

Summary of Event

In the early twentieth century, fossil fuels Fossil fuels became increasingly important as their use to power automobiles and big industry grew. Great Britain wanted to find secure sources of oil within its empire to meet its growing demand for this vital fuel. The Niger Delta Niger Delta region in the south of present-day Nigeria had promising geology and was first explored for oil in 1908. New exploration efforts by the Dutch company Shell D’Arcy Petroleum Shell D’Arcy Petroleum[Shell DArcy Petroleum] began in 1937 and resulted in the discovery of the first commercial well at Oloibiri (Bayelsa State) in 1956. The first shipment of crude oil for export occurred in 1958. This discovery of oil was to have a significant impact on the development and situation of Nigeria. Nigeria;oil industry Petroleum trade;Nigeria Oil fields;Nigeria [kw]Oil Is Discovered in Nigeria (June 5, 1956) [kw]Nigeria, Oil Is Discovered in (June 5, 1956) Nigeria;oil industry Petroleum trade;Nigeria Oil fields;Nigeria [g]Africa;June 5, 1956: Oil Is Discovered in Nigeria[05200] [g]Nigeria;June 5, 1956: Oil Is Discovered in Nigeria[05200] [c]Natural resources;June 5, 1956: Oil Is Discovered in Nigeria[05200] [c]Indigenous peoples’ rights;June 5, 1956: Oil Is Discovered in Nigeria[05200] [c]Environmental issues;June 5, 1956: Oil Is Discovered in Nigeria[05200] Bergheim, John Simon Gowon, Yakubu Aguiyi-Ironsi, Johnson

The search for oil in Nigeria that began in 1908 was in large part due to the efforts of British businessman John Simon Bergheim. Bergheim was able to get sole exploration rights and government financing in Southern Nigeria through the Nigeria Bitumen Corporation (a German company) and British Colonial Petroleum. Drilling was done around Okitipupa in the Araromi area (Ondo State) until Bergheim’s death in 1912 ended the effort. In 1938, Shell D’Arcy (Shell and Royal Dutch), received the concession to seek oil in all of Nigeria. World War II delayed these efforts, but in 1947 Shell joined with British Petroleum British Petroleum (BP) to explore for oil in Nigeria. The first exploratory well was drilled in 1951. More wells soon followed. The first commercial well was established on June 5, 1956, at Oloibiri. The oil was sent by pipeline to Port Harcourt, where the first shipment of oil occurred on February 17, 1958. The production rate in 1958 was 5,100 barrels per day. With this success, the Shell-BP effort took on the name Shell-BP Petroleum Development of Nigeria Limited. Shell-BP Petroleum Development of Nigeria Limited[Shell BP Petroleum Development of Nigeria Limited]

Other oil companies were attracted to the region by Shell-BP’s efforts. Mobil had been granted some limited concessions for exploring for oil in 1955-1956. Shell-BP’s concession over the whole country was reconsidered in 1959 in view of the discovery of commercial oil. The government decided that it would be better to increase the number of firms involved in the country’s oil industry. Shell-BP gave up 50 percent of its concession in the Niger Delta region. Tenneco, Tenneco a U.S. company, received a concession in 1960. The political situation changed dramatically in that year because Nigeria became an independent country.

Nigeria had been created in 1914 by the merging of two British protectorates. Nigeria formally received its independence from Great Britain on October 1, 1960. The new country was to have the British monarch as the head of state, but the new government quickly changed to a federal republic instead. The newly independent government quickly threw open the exploration for onshore and offshore oil to other interested international oil companies. Soon oil companies such as the U.S. companies Texaco, Phillips, and Gulf (which later became part of Chevron), the French company Safrap (later Elf), and the Italian company Agip joined in the hunt for oil. It was soon apparent that Nigeria had tremendous potential in oil. Elf Elf (petroleum company) discovered the Obagi field in 1963 and began producing 12,000 barrels per day in 1966. Gulf began oil production in 1963. Phillips started production in 1967. Agip found oil in 1965 and began production in 1970. Mobil also began production in 1970. Other oil companies joined the effort in later years.

Nigeria’s political situation was unstable because of ethnic tensions between the three largest groups: the Hausa-Fulani Hausa-Fulani people[Hausa Fulani people] in the north, the Yoruba Yoruba people in the southwest, and the Igbo Igbo people in the southeast; the desire to control the wealth generated by the new oil production made matters worse. The initial federal republic was overthrown by a military coup of Igbo officers on January 15, 1966, and was replaced by a military government headed by General Johnson Aguiyi-Ironsi. This new government fell within the year to another military coup by northern region officers. Major General Yakubu Gowon became the head of the new government. He held this position until 1975, when he was removed from office through another military coup.

The Igbo community felt threatened by the new government and feared that too much of the oil revenue from their southeastern region, which was significant, would go to other parts of Nigeria. By 1966, Shell-BP and Elf were producing approximately 400,000 barrels per day in the southeast. The leadership of the southeast region demanded that the oil companies (mainly Shell-BP) pay their royalties directly to the regional government. The federal government resisted this demand. When Shell-BP made an offer of payment to the regional government, the federal government responded with a blockage of the oil terminal in the southeast. The southeastern region seceded as the Republic of Biafra Biafran secession (1967) in May, 1967. A bloody civil war Nigerian civil war (1967-1970) Civil wars;Nigeria raged until 1970, when it ended with the return of Biafra to Nigeria. Oil production in the war zone was greatly reduced, and oil companies were accused of supporting one side or the other during the war. These were problems that oil companies would face again as oil production occurred in politically unstable regions.

One of the direct consequences of the civil war was the naturalization of the oil industry in May, 1971, by the government of General Gowon. Before 1971, the Nigerian government had simply signed business agreements with the oil companies to grant concessions for oil exploration and production. The Nigerian National Oil Corporation Nigerian National Oil Corporation (which became the Nigerian National Petroleum Company when it merged with the Ministry of Petroleum Resources in 1977) was formed to require legally that the Nigerian government be an active part of the industry. This move also allowed Nigeria to join the Organization of Petroleum Exporting Countries Organization of Petroleum Exporting Countries (OPEC) as its eleventh member. The federal government received 35 percent of the oil companies’ ownership in 1973. The ownership was increased to 55 percent in later years.

Significance

The discovery of oil in Nigeria in 1956 was an important factor in the development of Nigeria as an independent nation. As the largest producer of oil in Africa, Nigeria has generated high revenues, but at a cost. There have been continuous conflicts over the oil revenue, from the civil war in 1967 to the present day. Kidnappings, shootings, and armed takeovers are common in the regions of oil production. The theft of oil from pipelines by nearby residents is common and often has tragic consequences when large explosions occur. Government corruption is rampant; in fact, the Nigerian government is recognized as one of the most corrupt in Africa.

The emphasis on oil has also hurt efforts to develop agriculture and manufacturing in Nigeria as resources and workers flow into the oil industry at the expense of other industries. Furthermore, Nigeria has paid a heavy price in environmental damage to the delta and its offshore region as oil production has grown with little effort to protect the environment. Environmental policy;Nigeria This damage has led to strong protests by the delta inhabitants and conflicts with the federal government. An important leader in this protest movement, Ken Saro Wiwa, was executed in 1996. As of 2007, Nigeria was still struggling to come to terms with its oil wealth and how to best use it in the country’s development. Nigeria;oil industry Petroleum trade;Nigeria Oil fields;Nigeria

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Hunt, J. Timothy. The Politics of Bones: Dr. Owens Wiwa and the Struggle for Nigeria’s Oil. Toronto, Ont.: McClelland & Stewart, 2005. One account of the modern issues of corruption and environmental damage brought about by oil production in Nigeria.
  • citation-type="booksimple"

    xlink:type="simple">Sampson, Anthony. The Seven Sisters: The Great Oil Companies and the World They Made. New York: Viking Press, 1975. A best-selling history of the development of the international oil industry.
  • citation-type="booksimple"

    xlink:type="simple">Shah, Sonia. Crude: The Story of Oil. New York: Seven Stories Press, 2004. Chapter 7, “The Curse of Crude,” includes a discussion of the Nigeria oil industry’s situation.
  • citation-type="booksimple"

    xlink:type="simple">Yergin, Daniel. The Prize: The Epic Quest for Oil, Money, and Power. New York: Simon & Schuster, 1992. A well-researched, best-selling history of the oil industry. Nigeria’s role is mentioned briefly throughout the text.

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