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INTRODUCTION Oil and gas operations commenced in Nigeria effectively in 1956, with the first commercial find i....
By Madaki O. Ameh
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The Nigerian oil and gas industry: from joint ventures to production sharing contracts

By:
Madaki O. Ameh


Madaki O. Ameh a lawyer, works for Shell Nigeria and is currently a Chevening Scholar in Energy Law and Policy at the Centre for Energy, Petroleum and Mineral law and Policy, University of Dundee, Scotland, UK



INTRODUCTION
 
Oil and gas operations commenced in Nigeria effectively in 1956, with the first commercial find in that year by the then Shell D’Arcy.  Before this time, that is, from November 1938,  almost the entire country was covered by a concession granted to the company to explore for petroleum resources.  This dominant role of Shell in the Nigerian oil industry continued for many years, until Nigeria’s membership of the Organisation of Petroleum Exporting Countries (OPEC) in 1971, after which the country began to take a firmer control of its oil and gas resources, in line with the practice of the other members of OPEC. This period witnessed the emergence of National Oil Companies (NOCs) across OPEC member countries, with the sole objective of monitoring the stake of the oil-producing countries in the exploitation of the resource.  Whereas in some OPEC member countries the NOCs took direct control of production operations, in Nigeria, the Multinational Oil Companies (MNOCs) were allowed to continue with such operations under Joint Operating Agreements (JOA) which clearly specified the respective stakes of the companies and the Government of Nigeria in the ventures. 
 
This period also witnessed the arrival on the scene of other MNOCs such as Gulf Oil and Texaco (now ChevronTexaco), Elf Petroleum (now Total), Mobil (now ExxonMobil), and Agip, in addition to Shell, which was already playing a dominant role in the industry. These other companies were also operating under JOAs with NNPC, with varying percentages of stakes in their respective acreages.  To date, the above companies constitute the major players in Nigeria’s oil industry, with Shell accounting for a just little less than 50% of Nigeria’s total daily production, which currently stands at about 2.4 million barrels of oil per day.  JOAs are also still dominant in the oil industry in Nigeria, accounting for over 90% of total oil and gas production in Nigeria today.
 


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The emergence of offshore oil and gas operations and the granting of deep water acreages to the oil producing companies has however witnessed a shift from JOA regimes to Production Sharing Contracts (PSCs), with implications for the operation and regulation of the oil industry in Nigeria. This shift is attributable to a number of factors ranging from the complexity of operations in the offshore terrain, (which makes regulation under a JOA more difficult), to dwindling resources of the country, (which makes funding under the JOAs precarious for the government).  At a time when the Nigerian government is intent on increasing oil and gas reserves and the country’s production capacity without the necessary funds to back it up, a funding arrangement which achieves those objectives without having a negative impact on the scarce resources available for investment in other sectors of the economy is imperative. A number of oil and gas projects using the PSC model are due to come on stream soon and the successes recorded so far in this area have encouraged the government to consider extending PSC arrangements to other areas of the industry which had hitherto operated under JOAs.
 
This paper examines these contractual models in the Nigerian oil and gas industry, their respective strengths and drawbacks, and the current shift in emphasis from JOAs to PSCs, adducing reasons for this shift, and what this portends for investment in the sector in Nigeria.  The aim is to show the long term effects of this shift on the investment climate and the overall development of the Nigerian economy, in which oil and gas plays a central role.
 
THE JOA AND HOW IT OPERATES
 


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View Comments
Morpheus
Date:Mar 06, 2013
I'm just gonna ask a question..What is/are the impact(s) of oil and gas in the economic development of Nigeria???

ODUOLA SAHEED OLASUNKANMI
Date:Feb 14, 2013
I AM NEW HERE

Anthony Mohamed Aris Mahmoud
Date:Feb 05, 2013
wow so much of oil and the idea of oil rigs and oil tanks and people gotta look out from oil spills that can release CO2 to the air negatively affecting humanity

Razta
Date:Jan 14, 2013
I am also trying to fix on the pramrogme a Civil Society Platform to discuss a lot of emergent issues around local content e.g. the newly launched ICT4D Plan (10 Sectors) which contains a lot of opportunities for local content development. In addition we are bringing some young innovators with local content projects for possible NITDA support. The pramrogme is being finalized this week. We can meet in the venue on Thursday evening to take advantage of synergy but if not we can organize around you on Friday. A few leading CSO ICT leaders will be on the pramrogme too.

OMO
Date:Nov 20, 2012
enjoyed reading yor article it very enlightening it also shows things still function in Nigeria.

JOE ACHONYE
Date:May 07, 2012
PLEASE THERE ARE SOME FOREIGN PEOPLETHAT WOULD LIKE TO GO INTO JOINT VENTURE WITH NNPC AND WOULD LIKE TO KNOW HOW THEY CAN GO ABOUT IT.

Bobbo
Date:May 07, 2012
Good points all aorund. Truly appreciated.

Suevonne
Date:May 07, 2012
Articles like this really grease the sthfas of knowledge.

Woods
Date:May 07, 2012
Home run! Great sluiggng with that answer!

muydam
Date:May 07, 2012
i love this keep it up

dorah
Date:Sep 10, 2011
may i please know the meaning of the abbreviation JOA

Aina O.
Date:Sep 15, 2010
This is a very enlightening piece.

Somieari Beals (somiearib@yahoo.com)
Date:Aug 02, 2010
1. How does the JOA and PSC operate. i.e. what are their advantages and disadvantages 2. What does acreage mean in the oil and gas industry?

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