Production and exploration

As of 2000, oil and gas exports accounted for more than 98% of export earnings and about 83% of federal government revenue, as well as generating more than 40% of its GDP. It also provides 95% of foreign exchange earnings, and about 65% of government budgetary revenues.

Nigeria's proven oil reserves are estimated by the U.S. United States Energy Information Administration (EIA) at between 16 and 22 billion barrels (3.5×10⁹ m³),^[1] but other sources claim there could be as much as 35.3 billion barrels (5.61×10⁹ m³). Its reserves make Nigeria the tenth most petroleum-rich nation, and by the far the most affluent in Africa. In mid-2001 its crude oil production was averaging around 2.2 million barrels (350,000 m³) per day.

Nearly all of the country's primary reserves are concentrated in and around the delta of the Niger River, but off-shore rigs are also prominent in the well-endowed coastal region. Nigeria is one of the few major oil-producing nations still capable of increasing its oil output. Unlike most of the other OPEC countries, Nigeria is not projected to exceed peak production until at least 2009. The reason for Nigeria's relative unproductivity is primarily OPEC regulations on production to regulate prices on the international market. More recently, production has been disrupted intermittently by the protests of the Niger Delta's inhabitants, who feel they are being exploited.Nigeria's total petroleum refining capacity is 445,000 barrels per day (70,700 m³/d), however, only 240,000 bbl/d (38,000 m³/d) was allotted during the 1990s. Subsequently crude oil production for refineries was reduced further to as little as 75,000 bbl/d (11,900 m³/d) during the regime of Sanni Abacha. There are four major oil refineries: the Warri Refinery and Petrochemical Plant which can process 125 million barrels (19,900,000 m³) of crude per day, the New Port Harcourt Refinery which can produce 150 million barrels per day (24,000,000 m³/d) (there is also an 'Old' Port Harcourt Refinery with negligible production), as well as the now defunct Kaduna Refinery. The Port Harcourt and Warri Refineries both operate at only 30% capacity.^[4]

It is estimated that demand and consumption of petroleum in Nigeria grows at a rate of 12.8% annually.^[4] However, petroleum products are unavailable to most Nigerians and are quite costly, because almost all of the oil extracted by the multinational oil companies is refined overseas, while only a limited quantity is supplied to Nigerians themselves.

Offshore

Deepwater Drilling

Oil companies in Africa investigate offshore production as an alternative area of production. Deepwater production mainly involves underwater drilling that exists 400 m or more below the surface of the water. By expanding to deep water drilling the possible sources for finding new oil reserves is expanded. Through the introduction of deep water drilling 50% more oil is extracted than before the new forms of retrieving the oil.^[5] Angola and Nigeria are the largest oil producers in Africa. In Nigeria, the deepwater sector still has a large avenue to expand and develop. The amount of oil extracted from Nigeria is expected to expand from 15,000 bbl/d (2,400 m³/d) in 2003 to 1.27 Mbbl/d (202,000 m³/d) in 2010.^[5] Deepwater drilling for oil is especially attractive to oil companies because the Nigerian government has very little share in these activities and it is more difficult for the government to regulate the offshore activities of the companies.^[5] Also, the deepwater extraction plants are less disturbed by local militant attacks, seizures due to civil conflicts, and sabotage.^[5] These advancements offer more resources and alternatives to extract the oil from the Niger Delta, with hopefully less conflict than the operations on land.

[edit]Natural gas

Natural gas reserves are well over 187 trillion ft³ (2,800 km³), the gas reserves are three times as substantial as the crude oil reserves. The biggest natural gas initiative is the Nigerian Liquified Natural Gas Company, which is operated jointly by several companies and the state. It began exploration and production in 1999. Chevron is also attempting to create the Escravos Gas Utilization project which will be capable of producing 160 million standard ft³ of gas per day.^[6]

There is also a gas pipeline, known as the West African Gas Pipeline, in the works but has encountered numerous setbacks. The pipeline would allow for transportation of natural gas to Benin, Ghana, Togo, and Cote d'Ivoire. The majority of Nigeria's natural gas is flared off and it is estimated that Nigeria loses 18.2 million USD daily from the loss of the flared gas.^[6]