CHAPTER ONE

INTRODUCTION

I .1 BACKGROIJND OF THE STUDY

Energy is at the core of human existence. It is also the pillar of wealth creation. As

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such, modern society cannot seriously address issues of development if such consideration is not based on the foundation of effective energy planning and management that enhances optimal utilization, regular supply and availability of energy resources. Humans have been aware of the natural flainnlable gases from the

earth for at least several thousand years. Gas was not used extensively as a fuel source until the nineteenth century. Although natural gas was used as early as 1821 to

illuminate the town of Fredonia, New York; its widespread use i n the United States awaited the rise of the petroleum industry. (NCEMA, 1999 and Barnes et al, 2005).

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Nigeria is richly endowed with energy resources. These include coal, tar sand, oil, natural gas, hydroelectricity, solar and so on. The con~mercialenergy sector is, however, dominated by oil and gas, both of which jointly account for 71 per cent of con~mercialdomestic energy resources. (Iwayerm and Adeniltinju,200 1). Thus, oil and gas play significant role in the development of the Nigerian Economy.

Actually, the search for oil in Nigeria began in 1908 when a German company, Nigeria Bitumen corporation, drilled fourteen wells in what is today Lagos state before ceasing operations with the outbreak of World War I. Interest in the possibility of

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discovering oil in Nigeria revived in 1937 with the establishment of Shell / D'  Arcy

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Exploration parties, a consortium owned equally by Royal Dutch Shell and British Petroleum that later became the Shell-BP Petroleum Development company of Nigeria limited. In November 1938, this company received Oil Exploration License (OEL) covering all of Nigeria. However, by 1957, Shell-BP had reduced its acreage to 40,000 square miles of oil prospecting Licenses (OPL'S). Out of this acreage, Shell-BP converted nearly 15,000 square miles into Oil Mining Lease (OML'S) in 1960 and

I              1962. Then, Shell-BP    returned the residual to the Nigerian government.

Between 1938. and 194 1 , Shell-BP undertook preliminary geological reconnaissance. After a five-year interruption caused by World War 11, it intensified and followed up

this activity with geopolitical surveys i n the 1946-5 1 period. In 195 1, Shell-BP drilled its first wildcat well. This drill came up dry. During tlie next four years, the company concentrated efforts in the cretaceous areas rinming tlie Niger Delta without discovering any oil-producing wells. After shifting focus to the Tertiary area of tlie Delta itself, Shell-BP made Nigeria's first commercial discovery in 1956 at Oloibiri now in Bayelsa state). This lunched off a period of extensive exploration activity in the tertiary, which is still continuing. Nigeria was, thus, ushered into the intei~iational oil stage.

However, even before Shell-BP started exporting oil from Port Harcoui-t in 1958, other companies began to show interest in Nigeria. Mobil carried out reconnaissance work in tlie north western comer of the country in the mid-1950's and then shifted to thc coastal area in what is now Lagos State between 1958 and 1961, drilling four dry

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holes before abandoning the area. Following Shell-BP's  release of acreage, Tenneco,

Gulf, Agip,  Satrap, and  later Phillips obtained  onshore OPL's.  Additional  onshore

OEL's were later granted to ESSO, Satrap, and Great Basins. Furthermore, in  1760,

Nigeria divided its offshore continental shelf into twelve bloclts of about 1,000 square

miles each. Ten of these bloclts were taken up in 1961 - four by shell-BP, two by Gulf, two by Mobil, and two by Texas Overseas wllich made Nigeria's initial offshore oil strike in 1763. Out of the remaining' two offshore blocks, Gulf took one in 1964 and Union obtained the other block in 1967. (Pearson, 1770).

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Thus, oil production has been going on in Nigeria for about 48 years together with the production of natural gas. Associated gases are routinely flared in the course of producing and processing oil. Flaring is a means of safely disposing of waste gases through combustion. This is carried out with an elevated flare througl~the top of a