9.1.2 A brief account of the economic, geographic and social features of oil exploitation in the Niger Delta (situation as of 1995)

The first discovery of oil in Nigeria traces back to 1956 at Oloibiri in the Niger Delta, four years prior to the country's independence.1 In 1958, Nigeria joined the ranks of oil producers and exporters.2 During the worldwide oil boom of the 970s, output from oil exploitation rose rapidly and significantly increased the revenue of the Federal Government. Billions of dollars worth of oil exploitation later, Nigeria became the largest oil producer in Africa and ranked as the eighth-largest world oil exporter.3 The country is also the fifth largest oil producer in the Organisation of Petroleum Exporting Countries, of which Nigeria is a State Party since 1971.4

Indeed, Nigeria's economy is largely dependent on the petroleum sector, which provides around 95 per cent of the country's export earnings and over three quarters of government budgetary revenues.5 Akin to other parts of the world which are characterised by a weak regulatory environment, the very resource dependence has 'cursed' Nigeria with an increased vulnerability to price shocks and lopsided investment.6

The main oil-related activities undertaken by foreign companies in Nigeria are performed in joint ventures with the Nigerian National Petroleum Corporation (NNPC), a public organisation founded in 1977 to manage all governmental interests in the Nigerian oil industry.7 The NNPC enjoys a privileged position in the oil sector; it owns 55 to 60 per cent share in all joint ventures in the country. Of these joint venture companies, Shell Petroleum Development Company of Nigeria (SPDC) is the largest.8 It accounts for more than 40 per cent of all oil production in the country, involving the following joint venture partners: NNPC as the majority share-holder (55 per cent); Shell (30 per cent); Elf Petroleum Nigeria Ltd (10 per cent), a subsidiary of the French oil company Total; and the Nigeria Agip Oil Company (10 per cent), a subsidiary of Agip of Italy.9 SPDC's ultimate parent company is thus Royal Dutch Shell pic (Shell), which is incorporated in the UK.10 SPDC operates under a Joint Operating Agreement, which governs the administrative relations between the partners, including the budget approval and supervision, the crude lifting and sale by the partners in proportion to equity, and funding by partners. A Memorandum of Understanding with the Federal Government sets the legal and fiscal framework, such as the allocation of oil income between the partners, namely the payments of taxes, royalties and industry margin.11 According to Shell, the Federal Government received around 95 per cent of the profit derived of oil production.12 The activities are financed proportionally to the shareholdings of the partners. As the operator of the joint-venture, SPDC is responsible for the day-to-day operations on the basis of the Joint Operating Agreement.13 SPDC's framework of activities is described as follows:

The company's operations are concentrated in the Niger Delta and adjoining shallow offshore areas where it operates in oil mining lease area of around 31,000 square kilometres. SPDC has more than 6,000 kilometres of pipelines and flow lines, 87 flow stations, 8 gas plants and more than 1,000 producing wells. The company employs more than 4,500 people directly of whom 95 per cent are Nigerians. Some 66 per cent of the Nigerian staff members are from the Niger Delta. Another 20,000 people are employed indirectly through the network of companies that provide supplies and services.14

Most of the oil fields are located in the Niger Delta, a region that counts around 190 operational oil fields.15 Despite its oil-rich soil, the Niger Delta is ironically described as one of the poorest and most underdeveloped parts of Nigeria. Its dense population suffers the consequences of high unemployment, which amounts to at least 30 per cent in the capital of the region, Port Harcourt.

Additionally, education levels rank below the (already low) national average.16 In rural areas, basic commodities such as electricity, piped water or health facilities are still lacking.17 Vital public services are underfunded by the government, despite the wealth generated by the petroleum industry.18 High levels of corruption and poor governance are pointed out as some of the factors 'explaining' that oil royalties have not been adequately distributed to the population.

The same corruption and weak governance are said to affect the ability of the government to deliver its obligations to protect the environment against the negative impacts of the oil industry. There, the network of pipelines crossing the villages has caused hundreds of oil spills that often spoil agriculture and fishing.19 Moreover, oil companies have continued the environmentally harmful practice of gas flaring despite repeated promises to phase it out. As a result, the region suffers from acid rain. The unfair redistribution of oil revenues is also linked to the environmental degradation of the region; for instance, the use of wood as daily fuel by the population and intensive agriculture have both accelerated the deforestation of the area.20

One of the richest oil-producing areas, Ogoniland - a district in Rivers State in the central part of the Niger Delta - is particularly threatened by the side effects of the oil industry. From within this predicament, some of its people, the Ogoni, decided to raise their voice and take action for a better future.