SPE Member


Nigeria, as a member of the Oil Producing and Exporting Countries (OPEC), today operates various forms of Joint Venture arrangements. From 1908, when oil exploration first began in Nigeria by a German company, the Nigerian Bitumen Corporation (NBC), through 1937 when Shell D'Arcy took concession of the entire country as a single block to 1972 when more than 13 international companies joined the entrepreneurship, the Nigeria Petroleum Industry has witnessed numerous forms of Production Sharing Contract agreements. These arrangements which reflected state of the art of industry at the time, ranged from simply Tax and Royalty only through "Equity Sharing" to "PRODUCTION SHARING" AGREEMENTS. In addition, each phase of these agreements partly reflected the following:

  1. Prevailing Fiscal and Economic Environment in the Country.

  2. National Development and International Obligations/Needs.

  3. State of Global Economy.

This Paper will discuss among other things:

  • The Economic implications of each arrangement to both Joint Venture partners.

  • The possible future trends and their implications.

  • The salient points in each arrangement shall behighlighted.


In recent times, worldwide investment opportunities appear to have out-numbered the availability of funds. As a consequence, international oil companies may have to choose between highly ranked ventures to commit their scarce capitals. Usually oil and gas (O and G) ventures with very high potentials for profits would have to be compared with highly attractive ventures in other sectors of the economy around the globe. Several factors are usually considered before a decision to commit capital to O and G venture is made. These include among others: the anticipated price of oil or as, the technical cost of Exploration and Production (E and P) activities and the existing fiscal regimes that determine the economic environment. The oil industry worldwide has for over one decade now witnessed a number of uncertainties in the global oil market. The first significant crude oil price increase occurred in 1973 when prices more than quadrupled due to the Arab oil embargo that year. Many oil investors as a consequence reaped potential profits. The second world oil price increase which occurred in 1980 led to a dramatic decrease in demand, and in 1986, the collapse in the oil price, trigged by over-supply of crude oil drove many investors out of jobs. Thus market realisations in the industry worldwide dropped on several occasions to levels well below the official price expectations. In Nigeria, the effect was tremendous. Oil contributed over 90% of Nigeria's foreign exchange earnings, and about 80% of the nation's recurrent and capital expenditures. The effect of the market uncertainties was felt by both industry and government alike.

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