AN OVERVIEIW OF THE OIL AND GAS INDUSTRY IN NIGERIA BY DENNIS OTIOTIO

Introduction Nigeria is located within the Sub Sahara African region with a total land area of 923, 768.64 sq. km, and shares borders with the Republic of Benin in the west, Cameroon in the East, Niger and Chad in the north and the Gulf of Guinea to the south.1 With a population of about 160 million people, Nigeria is the largest oil producer in Africa and ranks among the top ten in the world with oil and natural gas endowments. According to the Oil and Gas Journal (OGJ), at the end of 2011, Nigeria is estimated to have a proven oil reserve of 37.2 billion barrels and a proven natural gas reserve of 180 trillion cubic feet (Tcf).2 Out of the thirty-six constituent states, nine states situated in the Niger Delta region of the Country produces the onshore oil and gas, while the source of the countrys offshore production is from wells in the Bight of Bonny, Bight of Benin and the Gulf of Guinea. According to the U.S. Energy Information Administration (U.S. EIA),3 Nigeria in 2011 produced about 2.53 million barrels per day (bbl/d) of crude oil and 1 trillion cubic feet (Tcf) of dry gas, out of which it exported approximately 2.3 bbl/d of crude oil and 17.97 million metric tons (875 Bcf) of liquefied natural gas (LNG) in 2011, this made Nigeria the 5th largest exporter of LNG in the world.4 It is worthy to note that in 2011, 33 percent (767,000 bbl/d) of Nigerias crude oil export was sent

Ministry of Environment of the Federal Republic of Nigeria, Official Bulletin, November, 2003, p1. 2 U.S. Energy Information Administration (U.S. EIA), Nigeria Country Analysis Brief, October 16, 2012 3 Id 4 Data analysis from the Global Trade Atlas (GTA), APEX Tanker data (Lloydss Maritime Intelligent Unit) and OPEC.
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to the United States, making Nigeria the fourth largest foreign crude oil supplier to the U.S.5 The Nigerian economy is largely dependent on the oil and gas sector, which accounts for about 95% of its foreign exchange earnings, 40% or more of its GDP and 75% of Federal Government total revenue6. This prompted the Federal Government to initiate policies and regulatory framework to attract more investment, guarantee increase production capacity and ensure a sustainable environment. Despite the abundant renewable and non-renewable mineral resources, Nigeria has not been able to meet the energy needs of its people. According to the U.S. EIA, the total energy consumption for Nigeria in 2010 was 4.4 quadrillion Btu (111,000 Kilo tons of oil equivalent), 82 percent of this figure came from traditional biomass and waste, 1 percent from hydro power, 4 percent from natural gas and 13 percent from oil. The electrification rate in Nigeria is 50 percent, which means that about 80 million people have no access to electricity in Nigeria. The current installed capacity of the country is 6 gigawatts (6000 MW) but the federal Government has promised to install 40 gigawatts (40000 MW) capacity by 2020. The countrys source of electricity consists of 64 percent thermal (gas) power plants, 13 percent thermal (oil) power plants and 23 percent hydroelectricity. The development of the various sectors of the economy, such as agriculture, manufacturing, health, education, tourism, etc., depends highly on reliable and efficient power supply. But successive governments have been struggling with the problem of efficient and sustainable power supply without a solution. The present government has embarked on a reform program aimed at privatization of the power sector, which is expected to bring about a rapid transformation of the sector that will guarantee reliable power supply. There were indication as at 2011 that some private companies in the US and Japan had declared their readiness to invest in the U.S. EIA, see note 2. IMF Country Report No. 12/194, 2011 Article IV Consultation Report on Nigeria, July, 2012. 2
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Nigerian power sector. According Wanda Felton, First Vice President, United States Export Import Bank (USEXIM), $1.5 billion have been secured as initial investment in Nigerias power generation, transmission and distribution. Presently some independent power plants are under going construction, and are to be completed in the next two years. HISTORICAL DEVELOPMENT OF OIL AND GAS PRODUCTION Oil and gas exploratory activities in Nigeria began in 1908 when the Colonial Government gave a royal charter to the Nigerian Bitumen Corporation (a German entity) and British Colonial Petroleum (a Colonial chartered corporation), which commenced exploratory activities in Araromi area in Western Nigeria, however the activities were abruptly terminated due to the First World War in 1914. Exploratory activities resumed in 1937 when Shell Petroleum Development Company of Nigeria (formerly Shell DArcy, a consortium of Shell and Royal Dutch) was awarded the sole exploratory license covering the whole territory of Nigeria to prospect for oil. This effort was also interrupted by the outbreak of the Second World War, but resumed in 1947. After several years of concerted and rigorous effort in drilling 28 wells and 25 core dry holes, oil was discovered in commercial quantities at Oloibiri in Bayelsa State in 1956, and actual production of 5,100 bbl/d. was recorded in 1958. After Nigerias independence in 1960, the indigenous Government opened up the oil industry by giving exploratory rights in onshore and offshore areas of the Niger Delta region to Mobil, Agip, Safrap (now Elf), Tenneco (now Texaco) and Amoseas (now Chevron). This act divested Shell of its monopoly status, though it was and still the largest international oil company operating in Nigeria. As more companies joined in the production, Nigerias oil production rose to a peak of 2.4 million bbl/d in 1970, thereby making Nigeria to be a major oil producing nation, ranking 7th in the world. Initially government interest in the oil industry was limited to the collection of royalties, lease rentals and taxes, but that changed with the United Nations 3

Resolution on Permanent Sovereignty over Natural Resources7 which spurred the Nigerian Government into taking positive steps to control the oil and gas industry by enacting the Petroleum Act in 1969, which vested the ownership and control of all petroleum resources in the Federal Government. Subsequently Nigeria joined the Organization of Petroleum Exporting Countries (OPEC) in 1971 and in furtherance of OPECs resolution urging member states to acquire controlling interest in concessions held by foreign companies, Nigerias military government established the Nigerian National Oil Corporation (NNOC) by a decree in 1971. Pursuant to the powers granted it by the decree, in 1971 the NNOC (which later became NNPC in 1977) acquired controlling interests in the oil companies operating in the country. Presently, the NNPC have JVCs with six IOCs and one indigenous oil company. 1. Shell (SPDC), which accounts for about 40 percent of Nigerias total oil production. The joint venture is composed of NNPC (55%), Shell (30%), Elf (10%), and Agip (5%). 2. Chevron (CNL) composed of NNPC (60%) and Chevron (40%). 3. Mobil (MPNU) composed of NNPC (60%) and Mobil (40%). 4. Agip (NAOC) composed of NNPC (60%), Agip (20%) and Phillips Petroleum (20%). 5. Elf (EPNL) composed of NNPC (60%) and Elf (40%); about 100,000bpd and 6. Texaco Overseas (TOPCON) composed of NNPC (60%), Texaco (20%) and Chevron (20%). NNPC has 17 Production Sharing Contracts (PSC) with Addex, Snepco, StatOil, Esso, Oranto, Ocean Energy, Philips, Conoco, ChevronTexaco, Elf, NAE, PetroBrass; and one service contract with Agip. In the downstream, NNPC has four refineries in Kaduna, Port Harcourt and Warri that were built between 1978 and 1985 with a total installed capacity of 445,000 bpd and these refineries are linked with a network of pipelines and Depots.

GA Res. 1803 (XVII), UN GAOR, 17th Sess., Supp. No.17, UN doc. A/5217 (1962)15.

In 1977, when NNPC was created, its primary function was to oversee the regulation of the Nigerian oil and gas industry with a secondary mandate for upstream and downstream developments, but today it has been transformed into a regulatory and business corporation. The Nigerian government in 1988 restructured the NNPC into six Directorates namely; Exploration and Production, Refineries and Petrochemicals, Finance and Accounts, Commercial and Investment, Corporate Services, and Gas and Power under a Group Managing Director. Twelve subsidiaries were also formed namely; Duke Oil, Hyson (Carlson Bermuda), Integrated Data Services Ltd (IDSL), National Engineering & Technical Co. (NETCO), Nigerian Gas Co. (NGC), Nigerian Petroleum Development Co. (NPDC), National Petroleum Investment Management Service (NAPIMS), Warri Refinery & Petrochemical Co. (WRPCO), Kaduna Refinery & Petrochemical Co. (KRPC), and Port Harcourt Refinery Co. (PHRC). REGULATORY REGIME The Constitution of the Federal Republic of Nigeria 1999, section 44(3), vest the ownership and control of all minerals, mineral oils and natural gas in, under or upon any land in Nigeria, its territorial waters, and exclusive economic zone on the Federal Government, and the Federal Government is to manage such minerals in such manner as may be prescribed by the National Assembly. Thus the Constitution confers exclusive jurisdiction on the National Assembly on matters relating to oil, gas and other minerals. This provision is an adoption of a series of statutory laws and regulations promulgated by the Federal Military Government between 1969 and 1990. The most important of these legislations include the Petroleum Act of 1969 as amended (1), Offshore Oil Revenue Act of 1971, Petroleum Profit Tax Act of 1959 as amended, Land Use Act of 1976 as amended, Oil Pipelines Act of 1978 as amended, Oil In Navigable Waters Act of 1979, Exclusive Economic Zone Act of 1978 (2(1) ), Hydrocarbons Oil Refineries Act, the Petroleum Equalisation Fund Act of 1989, Associated Gas Re-Injection Act of 1979, Nigeria Liquefied Natural Gas Act of 1990, 5

Oil Pipeline Regulations (Under the Oil Pipelines Act) of 1969, Petroleum (Drilling and Production) Regulations of 1969, and Petroleum Refining Regulations of 1969. The Petroleum Act and its regulations remain the primary law regulating oil and gas exploratory activities in Nigeria. The Act vested the entire ownership and control of oil and gas resources in, under or upon all land or territorial waters in the Nigerian government, and authorizes the Federal Ministry of Petroleum Resources to issue licenses to Nigerian citizens or companies incorporated in Nigeria for oil prospecting, drilling, production, storage, refining, and transportation activities. The Land Use Act vested land comprised in the territory of each state in the Governors of the State and such land are to be held in trust and administered for the use and common benefit of all Nigerians.8 The Act reduced the individual interest in land that was hitherto an absolute ownership right to a mere right of occupancy. Land can be compulsorily acquired for oil and gas activities on the payment of mere surface rights restricted to the value of unexhausted improvements at the date of the revocation, which are in most cases inadequate. The Exclusive Economic Zone Act, vest on the Federal Government of Nigeria sovereign and exclusive rights with respect to the exploration and exploitation of the natural resources of the seabed, sub soil and superjacent waters of the EEZ.9 These laws have been one of the major sources of conflict between the host communities, the international oil companies (IOCs) and the Federal government, which have considerably impeded oil and gas production in the Country. The Federal Government with a view to mitigate the effect of these conflicts enacted several legislation such as the Oil Minerals Producing Areas Development Act 1992 which was repealed by the Niger Delta Development Commission Act 2000, the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act of 2004, Nigerian Oil and Gas Industry Content Development Act 2010 and others.
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Land Use Act , Part 1: A49. Section 2(1)

THE PETROLUEM INDUSTRY BILL 2012 One basic obstacle to the development of the industry is regulatory uncertainty, lack of transparency and access to information. Thus in 2008 the Federal Government as part of its agenda for reform, embarked on a comprehensive legal framework. The purpose of the reform was to restructure the oil and gas industry, consolidate a plethora of laws, and increase government take and local content requirement. The product of this effort was the Petroleum Industry Bill (PIB), which was forwarded to the National Assembly. The fundamental objectives of the bill included, amongst others, the management and allocation of petroleum resources and their derivatives in accordance with the principles of good governance, transparency and the sustainable development of Nigeria.10 As promising as it seemed, its passage has been stalled as a result of opposition from the IOCs. There were indications that the Federal Government is putting extra effort to ensuring its passage as the President sent to both Chambers of the National Assembly a revised version of the PIB in July 19, 2012 for consideration and passage. The leadership of the National Assembly had also promised a speedy passage of the bill. Some of the significant provisions of the bill include the following; increasing exploration activities and expanding reserves; separate regulators for the upstream, midstream and downstream sectors; deregulate the downstream sector; the introduction of a revised fiscal structure that taxes IOCs at a higher rate; the establishment of a new license allocation process predicated on greater transparency; reorganization of NNPC into a privately run entity to ensure efficiency, increase revenue to government; compulsory financial provision for remediation of environmental damage; establishment of a Petroleum Host Communities Fund; and the establishment of a joint venture company to independently operate the various JVAs. The PIB in addition to the Ministry of Petroleum Resources, provide for the establishment of two regulatory agencies, three funds, three companies and one Petroleum Industry Bill 2008, 9 8.

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support bureau namely; Upstream Petroleum Inspectorate, Downstream Petroleum Regulatory Agency, Petroleum Technology Development Fund, Petroleum Equalisation Fund, Petroleum Host Communities Fund, National Oil Co., National Gas Co., National Petroleum Assets Management Co., and Petroleum Technical Bureau. The IOCs are opposed to the provision for the restructuring of the JVAs between them and NNPC, and are insisting on maintaining the status quo. Shell Country Chair, Mutiu Sunmonu said that the PIB in its present state is not favorable to the IOCs because it renders all deep water and dry gas projects non viable. He contended that a balanced PIB that will provide optimal revenue to the government, while providing sufficient incentives to promote growth in the industry is what is required. The PIB contains laudable provision that if passed into law will promote transparency, accountability, and create a conducive atmosphere in the industry. However the real fear is whether Nigerian Government will have the political will and courage to enforce the provisions of the bill when passed into law. The delay in passage of the PIB has stalled further investment in the sector since the IOCs are waiting to see the outcome of the PIB before making any considerable investment in the sector. According Andrew Bowman11, IOCs have withheld an estimated $40 billion of investment in Nigeria pending the outcome of the passage of the PIB. The PIB is the key to the future of the Nigerian Oil and gas industry as it is expected to signal the dawn of a new era in the troubled industry, and all stakeholders are eagerly waiting for its passage into law. RELEVANT OIL AND GAS REGULATORY AGENCIES IN NIGERIA The principal agencies responsible for regulating the oil and gas industry are 1. Ministry of Petroleum Resources (MPR) 2. Directorate of Petroleum Resources 3. Nigerian National Petroleum Corporation (NNPC) 4. Federal Ministry of Environment (FME) 5. Federal Inland Revenue Service (FIRS) Andrew Bowman, Challenges Ahead for Nigerias oil and gas industry, Financial Times, July 24, 2012.
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TYPES OF LICENCES The Petroleum Act provides for three types of licenses for upstream operations: Oil Exploration License (OEL), Oil Prospecting License (OPL) and Oil Mining Lease (OML). The Minister of Petroleum Resources is empowered to grant licenses to only Nigerian citizens or companies incorporated in Nigeria. The OPL and OML confer on the grantee the exclusive right to conduct petroleum operations in the granted area and to produce and dispose of the produced hydrocarbons. The OPL is granted for a primary term of five years for onshore and ten years for offshore and inland basins, while the primary term of the OML is granted for twenty years, renewable for another twenty years. The OPL or OML is deemed to have attained commercial quantity if there is a production of 10,000 bpd from the lease area.

IMPACT OF OIL AND GAS PRODUCTION ACTIVITIES Despite the several accruable benefits, oil and gas production in commercial quantities over the past five decades has brought devastating economic, social, political, security and environmental impact on Nigeria. Economic Impact: The production and export of oil and gas in commercial quantities and the attendant increased revenue made Nigeria to be a mono economy, solely dependent on oil and gas for its survival. The abundant agricultural and solid mineral resources were glaringly neglected in favor of oil and gas. Before 1960, Nigeria was heavily dependent on agricultural export. According to Dr. Okoh12, cocoa produce, palm produce, groundnut, cassava, rubber (natural), cotton, yam, fish and shrimps accounts for over 70 percent of total export between 1960 and 1970. The value of nonoil exports has been on the decline ever since. For instance the share of Dr. (Mrs) Rosemary N. Okoh, Nigerias Non- Oil Export product Mix and the Competitive Global Market Place, Deltas State University, Asaba, 2006.
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agricultural products in total export declined from 84 percent in 1960 to 1.8 percent in 1995.13 Nigerias economic stability is dependent on the stability of the world energy market; therefore any change in the price of oil and gas will directly affect the economy of Nigeria. Nigeria has been advised by the IMF and other experts to diversify its economy by evolving policies to encourage investments in agriculture, solid minerals, manufacturing and production. Another thorny economic issue is the modalities for the distribution of the oil and gas revenue between the federal government, the state governments and the oil producing host communities. This has been a perennial source of conflict as the host communities demand for a greater control of their natural resources, while the federal government through obnoxious legislations retained a lion share of the revenue. Presently 13 percent of oil revenue from onshore production goes to the nine oil producing states in the Niger Delta, while the remaining revenue is shared in the following ratio; federal government 47.2 percent, states 31.1 percent, local governments 15.2 percent and national priority service fund 6.5 percent. Increased oil revenue without a corresponding investment in infrastructure, agriculture and manufacturing, had caused Nigeria to be an importer of everything and exporter of only oil and gas. This has resulted into increase in inflation and drastic devaluation of the currency. Increased oil revenues have also caused a high degree of fiscal indiscipline and resource mismanagement. Social Impact: The petroleum industry has negatively impacted on the sociocultural life of the Nigerian society. Petroleum exploration activities have caused rural urban migration, as every body is moving to the city in search of oil company employment or contract. It has also created an occupational shift, as the predominant occupation before the discovery of oil was fishing and farming, but this has considerably

13

Central Bank of Nigeria Report (1960 1999), 2001.

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changed, as nobody is interested in agriculture. Everybody, including the uneducated is in search of white-collar jobs in the oil industry. The exposure of the rural communities to oil companies activities has drastically eroded the traditional social- cultural values in the communities. Oil activities have also caused intra and inter communal conflicts resulting in the loss of lives due to disputes over ownership of oil or gas wells. Bribery and Corruption is also another social malady that was introduced into the Nigerian society as a result of activities in the oil industry that has became endemic in the government and in the petroleum industry. Oil companies also caused instability in the traditional institutions as it became highly politicized leading to the frequent removal of community chiefs, which are mostly instigated by oil politics. The greatest social threat is the high rate of poverty in the country, which despite the increase in oil revenue, has geometrically increased over the last forty years. According to the World Bank Country Report on Nigeria (2010), most of Nigerias oil revenue is appropriated by 1 percent of the population. Political Impact: Between 1960 when Nigeria gained independence and 2007, Nigeria was ruled by the majority tribes who unfortunately do not produce any petroleum resource, but was in charge of the management of the huge oil revenues. This made the minority tribes in the Niger Delta to clamor for self-determination and resource control. At the height of the crisis in 2006, the region brought the political leadership of the country unto its knees, as it practically stopped oil and gas exploration in the region. This prompted the ruling Peoples Democratic Party (PDP) zoned the Vice Presidency to the region, and picked the then Governor of Bayelsa State, Dr. Goodluck Jonathan. Upon the untimely death of President Umaru Musa YarAdua in May 2010, Dr. Goodluck Jonathan, a son of the Niger Delta was sworn in as President of Nigeria for the first time and he contested and won the 2011 general election. This has brought respite to the Oil producing tribes who have for years clamored for political and economic control. 11

Environmental Impact: The Niger Delta is one of the worlds most important wetland and coastal marine ecosystem, with a population of about 30 million people. The region has four distinct ecological zones; coastal island, mangrove swamp, fresh water and rain forest zones.14 And its inhabitants solely rely on its environmental resources for both economic and social sustenance. However oil and gas exploration by IOCs, and some Nigerian companies since 1956 has seriously caused environmental degradation and biodiversity depletion in the Niger Delta. Environmental pollution caused by oil spills and gas flaring15 has caused aggravated poverty, loss of livelihood, contamination of source of drinking water, damage to agricultural land, destruction of shelter and preventable deaths. The United Nations Development Program (UNDP, 2006) report states that, there is a strong feeling in the region that the degree and rate of degradation are pushing the delta towards ecological disaster. Also a report by the U.N. Environmental Program (UNEP, 2011) on the Environmental Assessment of Ogoniland states that restoration of Ogoniland, which is an ethnic group in the Niger Delta could take up to 30 years and an initial investment of about $30 billion for the first 5 years. Although industry operators are required by law to observe the highest international environmental safety standards in their operations, corruption and compromise on the part of industry regulators, the lack of technical knowledge and cumbersome judicial enforcement mechanism have greatly impeded compliance. These unfavorable environmental conditions propelled the emergence of several environmental right movements that confronted the federal government, and IOCs for social, economic and environmental justice. Prominent amongst these movements are; the Movement for the Survival of the Ogoni People (MOSOP) which

ANEEJ, Oil of Poverty in the Niger Delta, Africa Network for Environment and Economic Justice Publication, 2004. 15 According to Friends of the Earth, 2.5 billion cubic feets of gas is flared every day in Nigeria. 12
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was led by the Late Ken Saro Wiwa; the Ijaw National Congress INC) led by Prof. Kimse Okoko; and the Environmental Right Action (ERA). Though these agitations started initially as a non-violent movement, it took a violent dimension when the Nigerian Government executed Ken Saro Wiwa, a writer, journalist, a proponent of the non-violent agitation and 1994 winner of the Right Livelihood Award, and 8 others in November 10, 1995. Security Impact: Oil activities which is at the center of the long running conflict between the Niger Delta Communities and the federal government, coupled with the state execution of Ken Saro-Wiwa, and the military invasion of Odi, resulted into the emergence of several armed militant groups, such as the Movement for the Emancipation of the Niger Delta (MEND), The Niger Delta Volunteer Force and many others. These militant groups supposedly formed to fight for the control of natural resources engaged in the destruction of oil installations, harvesting of oil pipelines, kidnaping of expatriate oil workers, and killing of security forces. These activities reached its peak in 2006, which forced oil companies to withdraw their staff and shut in production and declared force majeure on oil shipments. The result was a drastic decline in production, which plummeted from its peak of 2.65 million bbl/d in 2005 to a decrease of 25 percent in the successive 4 years. This state of insecurity in region threatened the very existence of Nigeria as the economy, which is highly dependent on the petroleum industry was stagnated, in addition government activities were almost grounded as there was no money for the government to spend. This prompted the Federal Government to consult with the Governors of the Niger Delta States on how best to curb the situation, assuage the agitations and restore normalcy in the region.

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THE GMoU PALLIATIVE MODEL Some of the major causes of conflict between the host communities and IOCs are the absence of development projects, the refusal by IOCs to honor agreements with host communities, and the non-employment of indigenes. One of the decisions reached during the consultation between Federal Government and Niger Delta state governors, was the need for the state governments to be involved in creating a secured atmosphere for the IOCs to operate. This led most of the states to create an office to liaise with the oil companies and the host communities. In 2006, The General Memorandum of Understanding (GMoU) was evolved as a comprehensive tripartite agreement between the oil company, host communities and the state government with the objective of streamlining the obligations and responsibilities of all parties, in order to ensure a more transparent and accountable development process, provide a regular and open communication channels, establish an accessible dispute resolution mechanism and prevent conflicts. The GMoU represents a major shift in oil company/ community relationship in the history of the Nigerian oil industry. The GMoU is a statement of understanding between the oil company and a cluster of communities (based on local government or historical and cultural affinity), stipulating the roles of all parties in the implementation of community development plan and ensuring a safe work environment for oil exploratory activities. It provides funds for development project, employment of indigenes, pollution response, conflict resolution and a management structure. The agreement is for a period of 5 years, renewable upon expiration for another 5 years. The state government and the oil company first negotiates the general terms of the GMoU and subsequently the state government moderates the negotiation between the oil company and the cluster communities, where the general terms of the GMoU is modified to suit the peculiarities of the cluster communities. 14

The GMoU provides for a well-defined governing structure. It has the State Steering Committee Chaired by the state government, the Cluster Development Board (CDB), and the Community Trust. The CDB is the main supervisory and administrative body saddled with the responsibility to draw up development plan and execute development projects. The CDB is made up of representatives of each community in the cluster, the oil company, state and local governments and other NGOs. Shell (SPDC), first tested the GMoU model, in Bayelsa State in its $1 billion Gbaran Ubie integrated oil and gas project in 2006. According to Okee Elechi, the Project Manager, the Gbaran project is a world class development that will boost Nigerias oil and gas resources significantly by providing more energy for Nigerians, increase exports of liquefied natural gas and meet government targets to reduce gas flaring. Shell signed four GMoUs with four clusters covering 44 communities in Bayelsa state. The State Government set up a Project Advisory Committee 1 (PAC1) at the state level chaired by the Deputy Governor and at the cluster level, 4 Project Advisory committees (PAC2) were set up for the 4 clusters in the area. The PAC1 was made up of state government officials, 1st class traditional rulers from the area, representatives of Shell and its major servicing contractors, and some prominent citizens. While the PAC 2 was composed of representatives from the various communities, representatives of shell and major oil companies and state and local government officials. The GMoU regulated all issues such as development projects, environmental protection, skilled and unskilled employment, workers union issues, contracts and dispute resolution. Despite the insurgency in the Niger Delta, the GMoU model was able to ensure a successful completion of the project without any major incident. The GMoU model has created a sense of belonging and pride amongst communities, as they are responsible for the implementation of their projects. The GMoU also provides a viable means for local and international donor agencies and even the various tier of government to fund development projects through the CDBs as its 15

composition is community based and its activities is rooted in transparency and accountability. This model can also be replicated with minor modifications by IOCs in other developing oil producing countries that are facing similar problems. CONCLUSION The Federal Government adopted the GMoU model and Amnesty model to restore peace into the Niger Delta region, this had prompted oil companies to resume operations and oil production output is gradually increasing. The crisis in the oil region, which had cost the government and IOCs a huge amount of money, would have been averted if the IOCs had implemented a sustainable development and an effective environmental protection plan in their host communities. The expansion of the oil and gas industry has no doubt produced significant changes in the social- political landscape of Nigeria. Issues of accountability, transparency, good governance, uncertain regulatory framework, environmental sustainability and reliably power supply have consistently hindered the smooth operation of the oil industry in Nigeria. But the passage of the PIB is expected to remedy the situation and usher in a new era, as it is seen as the gateway to the future of the oil industry in Nigeria. The international community, IOCs, Nigerian government officials and the host communities are all watching to see what it will bring. Also the privatization and deregulation of the power sector is likely to attract foreign investment that will increase the electric generation capacity in the country.

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