Introduction
The first commercial discovery of oil in Nigeria was in 1956 in Oloibiri, Niger Delta. The discovery attracted other multinational oil companies to explore the onshore areas of Nigeria in 1961. As more players entered the upstream oil industry, the Federal Government of Nigeria created policies for the exploration and production of petroleum. Actual oil production and export from the Oloibiri field in 1958 with an initial production rate of 5,100 barrels of crude oil per day. The output rose to 2.0 million barrels per day in 1972 and a peak of 2.4 million barrels per day in 1979. Nigeria was a top oil producer, ranking 7th in the world in 1972, and has become the sixth-largest oil-producing country globally. (Source: NNPC)
Nigeria has about 159 trillion cubic feet of proven natural gas reserves. The country is among places with the top ten natural gas endowments in the world. However, Nigeria flares an estimated 40% of the natural gas produced and re-injects 12% to boost oil recovery. According to the World Bank, Nigeria contributes 12.5% of the world’s total gas flaring. (Source: NNPC)
The Federal Government set up policies to reduce gas flaring and improve the petroleum sector but faced slow growth. There were still gaps in the governance, infrastructure, and accountability. It became necessary to reform the entire petroleum sector in Nigeria. Better regulations, better returns on investment. The national move led to the birth of the Petroleum Industry Bill in 2000. Several attempts to pass the bill into law were unsuccessful for two decades. As a result, Nigeria lost about $50 billion in investment over the last ten years. (Source: Press release)
Finally, the Nigerian President signed the Petroleum Industry Act (PIA) 2021 into law on August 16, 2021. PIA 2021 is coming at a time when major oil producers are converting to clean energy. Mixed reactions from stakeholders, as usual, on the new law. Nevertheless, the much-awaited reform in the oil and gas industry will be attainable with accountability and transparency.
The Petroleum Industry Act 2021 seeks to encourage investment in the Nigerian petroleum industry. By balancing rewards with risk, the new law can increase revenue to the Federal Government of Nigeria. It also seeks to provide a forward-looking fiscal framework. However, a fiscal framework that excludes renewable energy may be relevant for a short period. The additional sources of funds such as levies, statutory contributions will expand the revenue of the Federal Government. Nevertheless, an equitable and transparent administration is necessary to attain the objectives.
The petroleum industry in Nigeria has upstream, midstream, and downstream operators.