The search for oil in Nigeria officially started in 1903.
Two companies, Nigeria Properties (Limited) and the Nigeria and West African Development Syndicate (Limited) commenced exploration for bitumen, coal and oil in concessions covering 400 m2 in the Agbabu-Mulekangbo area in the Lekki Lagoon region of Lagos Nigeria.
Geological investigations by Bernard A. Collins and A.H. Harrison confirmed the existence of vast bitumen deposits as well as the possibility of petroleum.
Real exploration of the hydrocarbon potentials of the country commenced, however, in 1908 under the Nigerian Bitumen Corporation (NBC), a German concern (some Industry historians argue that John Simon Bergheim was a British Businessman and that the NBC was a British-registered company and its shares were traded on the West African Market of the stock exchange in London)
The efforts were stalled both by Bergheim’s death in an automobile accident in September 1912 and the outbreak of the First World War, but the ground had been paved for Shell (then known as Shell D'Arcy) a state-sponsored company of the Colonial government. In 1938, the colonial government granted Shell monopoly over exploration of all minerals and petroleum throughout the entire colony.
The Royal/Dutch Company initially got the whole of Nigeria as one huge concession, which it then narrowed to the Niger Delta where in 1956, after having drilled some 15 dry holes, beginning with the lhuo-1 NW in Owerri, the first successful well was spudded at Oloibiri (in modern Bayelsa State).
Before commercially viable Oil was discovered at all, an ordinance had been made in 1914 making any oil and mineral under Nigerian soil legal property of the Crown.
Initially a 50–50 profit sharing system was implemented between the company and the government, concessions on production and exploration was the exclusive domain of the then Shell-British Petroleum. Other firms became interested based on the success of Shell. In 1959, the sole concession right over the whole country, earlier granted to Shell, was reviewed and exploration rights were extended to other foreign companies. By the early 1960s Mobil, Texaco, and Gulf (Gulf later became Chevron and a couple of decades later, Texaco was merged into Chevron) had purchased concessions.
Mobil was awarded the Sokoto Basin, the Benue Trough and fringes of the Niger Delta to explore in 1956. Seismic and field geological surveys in the Sokoto Basin yielded no success, and Mobil withdrew from Sokoto and obtained license to explore in the Dahomey Basin. Between 1959 and 1961, Mobil had drilled four dry wells in Dahomey Basin and pulled out of the area.
It was against this backdrop that the Nigerian Civil War broke out and resulted in a significant drop in output. Oil companies were uncertain as to the future of their investments depending on who prevailed in the war. Britain’s staunch support of the Nigerian Government made Shell, a major holder of concessions in the southeast a little more inclined to the Federal Government side. Safrap (Elf, now absorbed into Total) a French interest, was accused of favoring Biafra and enlisting the aid of France for the Biafran cause.
The Nigerian government was determined the Civil War scenario would never repeat itself. The 1969 Petroleum Decree dismantled the existing revenue allocation system that had divided revenue from oil taxes equally between federal and state government, and came up with an allocation formula in which the federal government controlled the dispensation of revenues to the States. The Eastern Region that was to constitute Biafra had been, according to General Yakubu Gowon split into:
§ The East-Central State comprising the present Eastern Region excluding Calabar, Ogoja and Rivers Provinces.
§ The South-Eastern State comprising Calabar and Ogoja Provinces.
§ Rivers State comprising Ahoada, Brass, Degema, Ogoni and Port-Harcourt Divisions.
By May 1971 the Nigerian Oil Industry was nationalized with the creation of the Nigerian National Oil Corporation (NNOC), the predecessor of the Nigerian National Petroleum Corporation (NNPC), and the admission of Nigeria into OPEC, the Organization of Petroleum Exporting Countries, in July 1971.
The Year 1978 would turn out to be a watershed with the creation by the Obasanjo Military Regime, of the Land Use Act which vested control over state lands in control of military governors appointed by the federal military regime. This would eventually culminate in the Section 40(3) of the 1979 constitution which declared all minerals, oil, natural gas, and natural resources found within the bounds of Nigeria to be legal property of the Nigerian federal government (ref. Section 315 (5) (d) of the 1999 Constitution) .
........TO BE CONTINUED