CHAPTER TWO
2.1 Historical Survey of Oil
Exploration and Extraction in Nigeria Since
1956
The history of appreciable
exploration and exploitation of oil and gas in Nigeria started with a German
company as far back as 19th century[1]
Within that period, exploration of oil in commercial quantity was rarely
mentioned in the Nigerian history of oil and gas production and exportation.
Consequently,
there was no much emphasis on what should be paid by this multinational oil
companies as royalties. Perhaps, the companies sometimes had little or nothing
to go home with after several unsuccessful prospecting, exportation and
drilling. It was on the mercy of this situation that the people then mostly
accept anything that was of customarily importance to them as loyalties.
It
was on the aforesaid situation that A.K. Mgbolu, in one of his books,55
declared as follows,
Exploration of
oil and gas in any commercial quantity was hardly known to the ancient
communities of the different nationalities that make up Nigeria, such complex
issues as oil exploration, drilling, refining and transportation on the high
seas and the sales in the intercontinental markets were well beyond the
knowledge of the people. No wonder, they only accept walking sticks, rum and
kola nut as royalties in the early years of exploration in Nigeria, since
custom is just a mirrow of accepted usage of a particular community or society
in question.[2]
On Sunday 15th
January, 1956, Oloibiri oilfield was discovered.[3]
The discovery of oil and gas in Commercial quantity by shell BP on the said
date in Oloiberi in the present day Bayelsa
State, ended the 50 years of
unsuccessful oil exploration in the Niger Delta area of Nigeria.
Early,
in August 1955, the Shell Darcy had drilled the discovered oil well vertically
to a total dept of 12008 ft, (3660m).[4] The well was tested and it flowed at
the rate of about 5000 barrels (790m3) of
oil per day and was deemed to be of commercial discovery. Following the
discovery, shell stepped up exploration in the Niger Delta. And by 1958, Shell
Diarcy had discovered oil in twelve areas in the Niger Delta some of which are;
Oloibini, Afam, and Bonny where the most promising fields were discovered.[5]
Significantly
too, Nigeria exported its
first crude oil in February, 1958 from the Oloibiri oilfield, this was done
through oil pipeline layed by Royal Dutch Shell from the port
Harcourt on Bonny
River to access export
facilities. The oil exported has the initial measurement of about 5,100
barrels.[6]
However,
the Oloibiri oil field produced the totality of (3,200,000m3) of oil
during its 20years life circle. And finally stop production in 1978
and the field was abandoned. Moreso, another section of the field was drilled
so as to increase production”.
Consequent
upon the development above, the inordinate duration of 30 to 40 years of mining
lease initially granted before 1959, was trimmed down to 20 years with right of
renewal upon application to the minister of petroleum”. The manner or procedure
with which the multinational oil companies are to be levied was also provided10 as follows;
There shall be levied upon the profits of each accounting period of any
company engage in petroleum operations during that period, a tax to be charged,
assessed and payable in accordance with the provisions of this Act.
And formula for charging and determining what
constitute penalties was also prescribed under S. 33 of the petroleum Act”.[7]
Upon joining OPEC,[8]
Resolution XVI of 1968, which mandates the state parties to participate
activity in the production of oil in their country immediately, Nigerian
government, required 30% participatory interest. This was increased to 33% in
1972 and 35% in 1975 by 1976, the interest was increased to 55 and 60% in 1979
and the increase continued at this rate to the year, 2000.[9]
Consequently, following the
report of the crude oil sale Tribunal 1980, the Federal Government modifies the
sale of production share contract. The current P.S.C. provides for Tax oil in
negotiated quantity to be allocated to the NNPC, on behalf of its self and the
contractor.[10]
Also, the production sharing contract of 1999, provides for the allocation of
crude oil proceeds in the priority order of Royalty oil, cost, tax oil, and
profit oil. The principal terms as used in the provisions governing the
production sharing contracts P.S.C and in the deep offshore and inland basin.
Apart from shell, other multinational oil companies
operating for oil in Nigeria
for oil exploration include; ESSO oil, EIF, Ashland oil, Shevron, Mobil and State oil.
By
the end of 1998, the deep water operates in Nigeria had achieved the following
success;
1. Acquisition
of 21,000 km seismic lines.
2. Acquisition
of 21,500 km seismic lines.
3. Drillings
of 33 exploration/appraisal wells in depths ranging from 300-14060 m. Better
still significant discovery reported by most of the operators. [11]Little
wonder then, that against a commitment of 864 million US Dollars, for the first
deep water prospecting under the production sharing contract (PSC). The
industry has invested approximately 1.3 US dollars up to the end of 1998.[12]
The history of Nigerian crude oil has been a
glorious story. In 2000, alone, Nigerian gas production in the year was
approximately 1,681.66 billion scf. NNPC upstream operations in joint
partnership with the major multinational companies which are operating
predominantly in the on-shore Niger Delta coastal with offshore areas and
lately in deep waters produce.[13]
There had been a continued breakthrough in the annals of oil exploration in Nigeria.
In August 2012, there was a report of discovery of crude oil by governor Aliyu
Wamakko of Sokoto
State.[14]
Infact, if a research is to be carried out to reveal the amount of oil deposit
in all parts of Nigeria,
I reasonably believe that the result will certainly show some traces of oil
deposit in virtually all the 36 states that make up the country.
2.2 The Impact of Oil and Industrial
Pollution on the World Environment and Nigerian Environment in Particular
The ravaging effect of oil and industrial
pollution on the world environment cannot be over emphasized. Too many losses
usually make the records wherever large amount of oil is discharged into the
marine environment. This occurs most of the times as a result of illegal
discharges of oil, tanker accidents, and explosion during exploration, pipeline
leakage, and operational discharge from tankers.[15]
The
pollution of the marine environment with chemical contaminant such as oil has
become one of the most critical environmental problems over the centuries. The
reason been that whenever a particular sea area is polluted at a particular
point, the pollution along side its resultant damage continue to ravage the sea
across many countries of the world. The effect is that the sea becomes on
conducive for aquatic lives, unfit for aquatic activities and loss of marine
resources. (More on water pollution will be discus under 3.3 of this chapter).
Similarly,
pollution emanating from industries constitutes various forms of air pollution
ranging from different characters of offensive odor diverse colorations, noise,
smoke, mist, soot, dust and smog.[16] Nigeria particularly had witnessed
series of environmental degradation resulting from oil pollution. Notably,
the most oil pollution prone areas in
Nigeria are the Niger Delta region and the people from these areas have
suffered from the consequences of pollution (detailed study on the people of
Niger Delta and environment fouling is made under 3.5 of this chapter).
Generally,
the impact of these pollutions on the environment could stem into the following
deplorable situations;
i. Water contamination: The discharge of waste
waters from industries into the sea or surface waters, oil spill from pipeline
or tankers, and other chemical contaminants. Sometimes pollute the waters and
make it unfit for its use.
The
various laws controlling and regulating oil pollution in Nigeria (as discussed under chapter
two of this work) frowned at this act. Also, our courts in various occasions
have held the offenders of these pollutions strictly liable for the offence as
witnessed in the case of Ryland v. Flectcher.[17]
This position was upheld in the case of Umudje v. Shell BP Dev. Co (Nig) Ltd,21 where the defendant company was held
liable for polluting the plaintiff’s fish pond and his land leading to the
death of fishes. In fact, there are several other cases where the accused
companies were held liable to pay compensation to the complainant. For example,
the recent cases of Niger Delta Farmers v. Shell BP oil Co. [18]Where
the Dutch Court in 2013 finds Shell guilty of oil pollution in Nigeria.
Finally,
where the water is contaminated with oil, the result is usually hazardous and
environmentally threatening with devastating effects on the ecosystem and
tourism.
ii.
Formation of Acid Rain: The activities of petroleum
industries in such areas as Warri, pot Harcourt and Kaduna can pose a severe
threat on the nature sometimes. It is noted that several billions cubic meters
of natural gas were flared at different sports in these oil refineries’ areas
yearly.[19]Dust
particles, oxides of nitrogen, carbon monoxide, carbon dioxide, oxide of sulfur
are emitted into the air. When the gases emitted from the flares mixed with the
vapour in the atmosphere, it may cause background atmospheric reaction,
resulting in the formation of acid rain.
iii.
Global warning: The gas emitted from the
industrial plants and automobile engine,
sometimes retard the movement of the useful energy radiated back from
the earth, from getting into the space in the process often referred to as
greenhouse effects. Such gases as methane, nitrous oxide, carbon dioxide and
water vapour, insulate earth surface and protect it from the concentration of
sum raze (excess warm temperature).
However, the rise in the
concentration of these gases, trap more heat within the atmosphere, causing
rise in temperature. Other wise known as global warning.
2.3 The Concept of Oil Pollution Damage
Oil pollution, as defined under the introductory
part of this work, is associated with the exploration activities mainly by the
oil industries. The meaning of pollution itself as was also explained under
chapter one, to include inter alia, direct or indirect introduction of
substances into the environment by man, having deleterious effect on human
health, animals, plants and other aquatic lives.
On
the other hand, environmental damage has been described to consist of pollution
in all ramifications, spillage, domestic refuse carefully thrown about
residential neighborhoods, inversion of industrial fumes and effluents into the
atmosphere, construction of structure without appropriate authorization and
compliance with health and town planning regulation.[20]
Oil
pollution damage according to international convention on oil pollution
preparedness, responses and co-operation,28 menace loss or damage caused outside the ship
carrying oil by contamination resulting from the escape or discharge of oil
from the ship, wherever such escape or discharge may occur, and includes the
costs of preventive measures and further loss or damage caused by forty
equipments
The
concept of oil pollution damage could further be discussed in the following
headings;
i. Land pollution: Oil spillage causes a very
high degree of land degradation. The land here is basically includes the soil,
the vegetation and the ecosystem. Water and air pollution will be treated
separately.
Some
communities in Nigeria, has suffered loss as a result of the discharge of oil
on the land which rained sere havoc on some of these animals and renders the
soil unfit for production of crops.
Basically,
discharge of oil or escape of oil from the defendants place or equipment is a
strict liability offence as witnessed in the case of Umudje v. Shell BP Nig Ltd.[21]
This position was followed in the recent case of National Oil spill detection v. PPMC,[22] Where the Federal High Court sitting
in Asaba delta State, imposed the sum of N62.5m fine on the pipeline and
product marketing company for refusal to cleanup and remediate some oil spills
caused by the company in Kaduna and its environs and other parts of the
country.
However,
it is a substantial defense to prove that the damage was caused by the
independent act of the third party as posited by the court in the case of machine Umudije & ors v. SPDC (Nig) Ltd
supra
Secondly,
where the plaintiff gave or consented to the act, he cannot in turn bring an
action to enforce the wrong. The principle of “volenti non fit injuria,”
will catch up with him.
Thirdly,
it is also a defense to prove act of God.
ii. Air pollution: Air pollution occur as a
result of release of chemical particles and inordinate sound vibration into the
atmosphere. Some of these gases includes but not limited to the following:
sulphur dioxide, chlorophlorocarbons, (CFCS), carbon monoxide and nitrogen.
In
cities where there is a high concentration of industries and automobiles, the
gases emitted into the atmosphere is combined with waste vapour in the air to
form acid which in turn return to the ground
as acid rain as explained before. And it can be noted that air pollution
mainly from cars and industries, places hundreds of tons of hydrocarbons to the
ocean each year.[23]
These particles which settled at the atmosphere are washed down by rain back
into the ocean, resulting to the death of aquatic lives.
Furthermore,
air pollution culminates to global warning any noise pollution. It is important
to re-emphasis as noted before that the green house gases in the atmosphere. On
the other hand, noise pollution comes as a result of release of dangerous sound
vibration into the atmosphere. Mining industries and aircraft sometimes causes
this type of pollution. However, section
247 of the Criminal Act,[24]
provides as follows:
Any person who vitiates the atmosphere in any place so as to make it
noxious to the health of persons in general dwelling or carrying on business in
the neighborhood, or passing along a public way; or does any act which is, and
which he knows or has reason to believe to be, likely to spread the infection
of any disease dangerous to life, whether human or animal; is guilty of a
misdemeanor, and is liable to imprisonment for six month.
In Nigeria, the problem is not always
the relevant law but the courage of the responsible official to enforce the
laws. As an average Nigerian I witness and it is an obvious fact that these
wrongs that the law aimed at protecting has like a norm stayed with us and it
seems no one cares.
iii. Water pollution: Water pollution like every
other kinds of pollution is the contamination of chemical substances with the
waters (be it stream, river or ocean or even ponds), resulting to fouling of
such water.
Usually,
when petroleum product is discharged into the water, it is spread in a tin
sheet manner and continues to float on the water surface thereby blocking all
the available air space into the water. The resultant effect of such an
incident is mass death of aquatic lives and loss of marine resources in the
water where the pollution occurs.
However,
apart from instances where the damage resulting to the spill or discharge of
oil into the water is caused by the natural occurrences such as rainfall, wind
storm or any other act of God and or the act of a third party,[25]
the various provisions of the laws regulating oil pollution, provides for
compensation for damage arisen from oil pollution. These laws have been treated
under chapter two of this work. The positions of these laws have been upheld by
the courts in so many cases emanating from oil pollution. For example, Wisky J.
in line with the provision of the oil pipeline Act[26]
ruled in the case of Ikpede v. S.P.D.C.
(Nig) Ltd,[27] that all companies who have been granted
license to prospect for oil in the country under the petroleum Decree (no 51)
of 1969 can lay under the oil pipeline in lieu
of compensation for any damage caused by leakage from oil pipeline.
Also,
in the case of S.P.D.C (Nig) v. Tiebovii[28]6
millions naira was awarded to the plaintiff as compensation for the damage done
to his swamp and for the death of his of fishes. The position was also the same
in the case of Niger Delta farmers v.
S.P.D.C (Nig) Ltd.[29]
2.4 Oil Spillage Cum Gas Flaring
A. Oil spillage:
Oil spillage in Onyori and Ors v. SPDC (Nig) Ltd and Ors[30]
was defined as non-continuous discharge into the environment which normally
occur as a result of accident caused by multinational companies’ equipments or
through human error.
However,
oil spillage of varying magnitude can occur at any stage in oil industry
operations. For instance, the world witnessed a large oil spill in 1967 at the
coast of England and Santa Barbara caused by the grounding of the ‘Terrey Canyon”
tanker off the coast of England.[31]
And that of California
two year later is larger than life demonstration.[32]
However, less dramatic spills occur routinely every year by the more vulnerable
and forty tankers.
The
laws regulating the offences of oil spillage in the country has been discussed
under chapter two of this work. Consequently, Nigerian courts in consonance
with the provisions of these law, now parade a long list of decided cases on
oil spillage. Notable among these cases are, chief Otoko v. SPDC (Nig) Ltd.[33]
where the supreme court held that the
defendant oil company was liable for the
spillage which caused the distribution
of the property of the plaintiff. Similar decision was also reached in the Umudje v. Shell BP (Nig) Ltd.[34]
where Shell BP was held liable for oil spill.
However,
Section 4(1) of the Decree[35]
provides defense for an offence of oil spillage to includes; discharge of oil
for the purpose of saving lives, vessel or cargo and accidental discharge done
to leakage.
Causes
of crude oil spillage include: equipment failure, sabotage, human error,
corrosion, blowouts, engineering errors, natural causes, act of third party and
accident.
B Gas Flaring:
Gas flaring in a large scale is an extremely
wasteful and environmentally harmful practice, which is now universally
discouraged as it is a major contributor of greenhouse effect.[36]
The issue of gas flaring has a nexus with economic, environmental and health
perspectives. Gas flaring constitutes an excessive waste of the nation’s gas
resources and can as well be resourceful if well managed. Acid rain in the
Niger Delta area has been linked with gas flaring although, this has not been
proven by results and assessments based on environmental impact studies
conducted in the region.[37]
corrosion of galvanized
steel roofs is one of the most frequent complained effect of gas flaring in
Nigeria, mainly because most houses are been covered with this sheet in the
country. The expected amount of N-oxides and SO2 being emitted from
gas flaring are estimated to be approximately 210,000 and 40,000 tons/year,
respectively in River and Delta
States (SIC).[38]
The government of Nigeria recognized the potentiality
of the natural gas industry and promulgated legislation banning gas flaring.[39]
Under the Associated Gas re-injection Act,[40]
all companies were to submit gas utilization preliminary programmes by 1st
April 1980, and detailed programmes on utilization or re-injection by January
1980. And so company is permitted to flare gas without the to flare gas without
the permission of the minister.[41]
Laws for the ceasure of gas flaring in Nigeria, has been discussed in
great detail in chapter two of this work.
2.5 The People of Niger Delta and
Environmental Fouling
Located in the swampy region of Nigeria, the Niger Delta people existed in an
area harboring the major natural crude oil deposit which “like a blessing has placed Nigeria in a viable position in the
world economy”.
Oil
has as in other oil producing countries of the world, transformed the political
structure of Nigeria
and enhanced a massive expansion in the bureaucracies of the federal Government
(Olorode1998; Jemoh and Aghalino, 2000). While the exploitation of oil has no
doubt, enhanced socio-economic transformation in many oil prospecting and oil
producing states. The accompanying fallout remains tragic and disturbing in
several states and oil communities of Nigeria.[42]
In Nigeria, oil pollution particularly oil spills
have destroyed the sources of livelihoods of the people of the Nigeria
especially of the Niger Delta area which is basically fishing and farming.[43]
The
underdevelopment in the river-rine communities of Niger Delta, partly due to
their relative inaccessibility and the higher costs of development projects
(for natural reasons such as the type of soil, higher technology and distance).
And partly due to government partial attention to the area in terms of development,
couple with the activities of the multinational oil companies (example Shell
BP) operating in the area which destroyed their farms and fish pond, triggered
of serious disturbances in the area.
In
the 1990s, tensions arose between the native of Ogoni people of the Niger Delta
and the Shell BP. The concerns of the people was that very little of all the
money earned from oil on their land was getting to them in spite of the
damages caused on them and their land
through oil pollution particularly from the shell’s operational activities.[44]
in 1993, the movement for the survival of Ogoni people (M.O.S.O.P) organized
large protests against shell and the government. After occupying the
refineries, shell withdrew their operations from the area.
Consequently,
Nigerian government raided their villages and arrested some of the protesters,
ken Saro Wiwa being the most prominent was later executed against widespread
international oppositions from the Commonwealth of Nations
and human rights organization.[45]
In order to alleviate the sufferings of the people of the Niger Delta area, the
Nigerian government has through various legislations made oil pollution a
compensatory offence.
Similarly,
payment of compensation for all the damage incurred in the cause of oil operation,
has become one of the condition precedence for renewal of an oil mining lease.
This was the opinion of the court, in the case of Seismograph Services Nig. Ltd v. Esis Akororo[46] (more details on compensation is
provided under Chapter Four of this work). Furthermore, among the series of
step taken by the Nigerian government and the multination oil companies to
combat environmental fouling in Niger Delta includes the formation of clean
Nigeria Association C.N.A) in 1981. With the primary purpose of maintaining the
capability to control spills of liquid hydrocarbons or pollutants in general
where exploration is carried out in Nigeria.[47]
[1] Yinka
Omoregbe Oil and Gas Law in Nigeria
(Malthouse press Ltd, 2001) P.10
[2] A.K.
Mgbolu Petroleum Act with Some Basic Concepts in Oil and Gas Law in Nigeria
(willyrose & Appeased
Publishing
Company 2011) p5
[3] Lewis v.
Bankole (1909) NWLR (Pt. 812) 107 . Oloibiri Oil Field Exploration History
Appraisal, Development
and
Production available at
http/./.www.en.wikipedia.org/./ assessed on
21/06/13
[4] Supra
[5] Page22 Op. Cit
[6] Page22 Op. Cit
[7] Petroleum Profit Tax Act. Cap 334 LFN 2010
[8] Page23
Op.Cit
[9]
Organization of Petroleum Exporting Countries (OPEC) 1960.
[10] A..K.
Mgbolu Faculty of law Ebonyi State University, Abakaliki Lecture Note 2013
[11]
Nigerian National Petroleum Corporation
(NNPC) Exploration. Available at
http././.www.nnpc.com.(-)
Exploration.abpx.searched on 20th June 2013
[12] ibid
P32
[13] Madele.
G. A Commercial and Industrial Law
Journal Vo1.no. 2 (2012)
(Comparative
Study of the Legal Control of Oil
Pollution in Nigeria and under International
Law) page. 130 www.nigeriantel.com/201/08/24.com assessed on 20/06/2013.
[14] Madele GA. “Cooperative
Study of the Legal Control of Oil
Pollution in Nigeria and under International
Law” (2012)
Vo1.1 no.2, Commercial and Industrial Law
Journal 129, P130.
[15]
Margaret T. Okorodudu, Laws of Environmental Protection ( Calop Publication
Nig.Ltd Ibadan,1998) page. 391.
[16]
2018661] L.R.I.Exch.265
[17] [1975],
11 se (Pt. 155) at P 693.
[18] Supra
Margaret T. Okorodudu Op. Cit, P392
[19] Supra
P2
[20] O.B. Ekop
(eds) Environmental Pollution and Management ( the Tropics Publishers,
Enugu,1990)vol.1 Ps. 377-398.
[21] Supra
P19
[22]
www.vanguarddugr.com/2012/04/oil-spi.
[23] Op.
Cit.
[24] Cap. C.
38 L.F.N. 2010
[25] Alubui & Ors v. Shell BP P.D.C (Nig) Ltd.
[26] Cap.
145, 2010
[27] [1973] M.W.S.J. 61 at Ps88-89
[28] Supra.
(35) [1982] Unreported Suit no. FCA/B/1/8 of 7th Dec. 1982.
[29] Supra P2
[30] [1982]
ibid P29
[31] T.A.
Omatola , “ Environmental Laws in Nigeria Including Compensation” (Faculty of
Law University of Lagos 1990) P235 and 234.
[32] [1990]6
NWLR (Pt. 159) Aat p. 693
[33] [1990]6
NWLR (Pt. 159) p. 693
[34] Oil in
Navigable Waters Decree 2010 ibid
[35] ibid P9
[36] Yinka
Omoregbe,. “Oil and Gas Law in Nigeria”,(Malthouse Press Ltd Ikeja Lagos,
Nigeria, 2001), P58
[37]
Op. Cit P36
[38]
Magerate T. Okorodudu, “Laws of Environmental Protection” (Caltop Publication
Nig Ltd,Ibadan, 1998)P401.
[39]
Associated has Re-injection Act Cap. A25 L.F.N, 2010.
[40] S. 3 of
the Act ibid. P50
[41] ibid P9
[42] Steve
Metiboba, “Socio-cultural issues in oil
exploration in Nigeria” Available at
htt/./www.umilorin.edu.nb(publication s/Dr. Ebonyi State University Law
Journals, Vol. 4. 2011. p. 232
[43] Oladele
G.A; Corporate Social Responsibility in Nigeria; the Emergenotadele G.A;
Corporate Social Responsibility in Nigeria; the Emergence Regulation, Ebonyi
State University Law Journal , vol. 4. 2011. 232.
[44] www.Nigerialandgasportal.com/phot
visited on 23/06/2013.
[45] ibid.
[46] [1974]6
NWLR
[47] Op.
Cit
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