Nigeria may not be a top-10 oil producer, but it is Africa’s largest at almost two million barrels a day in 2016. While the country enjoys a diversified economy, the oil industry was responsible for 9% of economic activity in 2016, and foreign exchange and government revenue remains highly dependent on oil.
Oil exploration in Nigeria has been a slow process, with the early part of the 20th century yielding little of worth. It began in 1907, when the Nigerian Bitumen Corporation started exploratory work, although they later left when World War I broke out. Licenses were later awarded to two companies – Whitehall Petroleum and the D’Arcy Exploration Company – but these also returned their licences in 1923 after failing to find commercially exploitable oil.
In 1937, the newly formed Shell D’arcy Petroleum Development Company of Nigeria (a consortium of what is now Shell and BP) started exploration after receiving a license. It was not until 1951 that the first test well was drilled, but no commercial quantities of oil were found until the discovery in Oloibiri in 1956. It had taken almost 50 years of sporadic exploration to find substantial oil reserves in Nigeria. Other important wells followed soon after, and crude oil production started in the late 1950s. Most of Nigeria’s primary reserves are now clustered around the Niger Delta, although there are also some off-shore rigs in the oil-rich coastal region.
The late 1950s also saw non-British firms being granted licenses, and many of the big oil giants now have a presence there. ExxonMobil, for example, has two affiliates conducting upstream operations in Nigeria: Mobil Producing Nigeria Unlimited and Esso Exploration and Production Nigeria Ltd. Mobil Oil Nigeria, a third affiliate, handles downstream operations, such as supplying slideway lubricants like Mobil Vactra 2.
Production in Nigeria has periodically faltered recently as it struggled with militant attacks on its infrastructure, often taking it below Angola in terms of production. It dropped to just 1.27 million barrels a day in March 2017 due to militant attacks on its oil infrastructure and the shutdown of a major field.
Considerable production has been lost due to the attack on the Forcados export terminal in February 2016. Shell attempted to resume exports in October 2016 following repairs, but a subsequent act of sabotage forced it to close again the next month. The Nigerian government is apparently engaging with militants to restore peak production levels.