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You are required to review the challenges and opportunities facing the oil industry in a typical country of your Choice (Nigeria) showing how the industry is striving to achieve sustainable processing and refining operations.


In your analysis, you are expected to provide relevant data showing how the performance of the industry has changed in your case country over the last five years especially in terms of:
use sub headings for each points below.


1. Efficiency of energy generation and processing
2. Environmental impact resulting from Greenhouse Gas (GHG) emissions
3. Global economy and fluctuating oil prices
4. Increasing potential for renewable energy deployment and use to replace fossil fuels
5. Use of petrochemicals
6. Oil pipeline and platform disasters and oil spills

The use of schematic diagrams and flow schemes is essential to clearly illustrate and demonstrate sensible energy use and management especially for the modern day highly complex and versatile refinery operations.
 

Challenges facing the Nigeria oil industry

The biggest industry in Nigeria is the petroleum industry. It plays an important function to the maintenance of the nation and economic development activities. Only a small amount accruable gain is used in Nigeria. Most of the amounts are used away where a lot of materials are made and hence creating employment chances for the residents of other nations. This is because of low native content which is a condition where a lot of works are given to foreign companies since the native firms have inadequate skills, manpower, and low completion and lack technical knowledge.

Nigeria has the second largest proven oil reserves in Africa, after those of Libya. The oil fields are located in the south, specifically in the Niger delta and offshore in the Gulf of Guinea. Current exploration activities are mostly focused in the deep and ultra-deep offshore, with some activities in the Chad basin, located in the northeast of the country. Nigeria has been a member of OPEC since 1971. Most of the oil is exported to North America and Western Europe.

Corruption and incompetence

Corruption is not new in the gas and oil company in Lagos. The most challenging is the one that happened in the time of general Babangida, where there was a loss of 12, 2 billion dollars which have been known during the period of gulf war crises and has never been counted up to date (Wilson ,2014, pp.69-81). This occurrence is just but one out of many that occurred in Nigeria. It should be noted that Nigeria could have earned about 340 million dollars in more than its 40 years of oil discovery. Nigeria contains 4 oil refineries that are running under capacity. Corruption is the huge problem that Nigeria faces that affect oil improvement from the scratch. It is very difficult to obtain the correct figure of how much money has been stolen on Nigeria oil sector. If the corruption is eliminated then the nation will have improved economic development.

According to Wilson (2014,pp.69-81), The shell which dominated at the mid 90's when it was told to repair at a given price it was deemed by the tender committee and it resulted to the work given to a less qualified industry which was unable to reach the maximum production for a given time. 

Mechanical breakdowns, militants, vandalism and fire

In Delta state, a pipeline fire in the year 2005 broke and led to the death of more than sixty people. The incidence was followed by an attack where armed men in speedboat boomed up opobo channel pipeline. In 2006 there was pipeline attack brought by brass cleek fields toward the resulted to shutting up of oil production due to lack of security.

Corruption

 Nigeria has embarked on the kidnapping of the workers in oil refineries that has led to the

loss of 16 billion dollars that they get from the export of oil (Wilson, 2014.pp69- 81). In 2006 there was kidnapping situation in the same region where about nine workers were kidnapped. After where the pipeline operated by Royal Dutch shell was brown up.

There was a close-up of two port which are Port Harcourt refinery for two months because of technical issues. The militia organizations and Niger rebel group have attacked the oil infrastructure leading to declining in its domestic refining potential. Also as they search for compensations or political power they lead to attacks.  Many foreign workers and their households have completely abandoned the Niger Delta due to progressive attacks. In 2006 four overseas workers of Royal Dutch shell were snatched and held for 19 days before they were realized on humanitarian ground. This led to Nigeria withdrawing licences that were issued to external and homeland firms to start oil refinery since the companies did not begin up any particular work after the five years.  

Pipeline vandalism has been a great challenge which is attributed by the militants who are sponsored by the corrupt government officials. For instance the operation at Warri and Kaduna in the year 2010 did not go through due pipeline damage. Fire and breakdowns are common in all industries but in Nigeria the main cause of the problem is poor control measures and untrained staff.

OPEC regulation

This arises from the argument that the body that regulates Oil Company has not favoured Nigeria as well in order for it to maximize its making. This body was formed in 1960 by Venezuela, Saudi Arabia Iraq, and Iran together with other five nations including Qatar Indonesia, Algeria which joined before Nigeria, Libya and United Arab emirate. OPEC control manufacture of its team has not helped Nigeria to increase its output.

Nigeria production remains in OPEC has prevented its refineries since budget of scale stand. Nigeria is not increasing its manufacture due to the quota levied by OPEC. There are questions why production of oil is very low. The reason behind that is due to OPEC cartels have created an obstacle to effective slow trade with other nations and the economic growth of Nigeria from its oil trade.

Inadequate finance and insufficient technical proficiency

The sector of finance in Nigeria has been going through the transformation so as the banking system can become competitive. The banking systems lack adequate finance to fund a large project in the country.

Infrastructure problems

Poor infrastructure

 Organisational problems which include poor transport systems, poor communication network, inadequate power source.  Poor infrastructure leads to delay of industrial development. Proper infrastructure gives rise to proper industrial company which in turn increases the market of oil. Poor infrastructure is the major problems in Nigeria From one region of the country to the other, and this makes Nigeria poor since the products cannot be transported.

Poor investment environment

Beside the inefficient infrastructure, the investment climate is poor, the housing is unaffordable, poor health facilities and insecurity due to crimes. This problem hinders the foreign straight investment. 

Political instability

 It is efficient for industrial development, and since Nigeria is a young democratic country there have been regular attacks on aliens and their interest in Niger Delta. This political instability has led to decrease in the development of oil industry.

Other problems include:

  • Lack of a motivating government agenda.
  • Lack of effective tools.
  • Inadequate education standards
  • Poor licensing programs

Opportunities

 Though there have been problems, a group of persons realized that Nigeria has many strengths which comprise of access to a lot of oil and gas reserves, a finely grown oil industry, a power sector that is privately placed for effectiveness and a capable local sector. Moreover, many countries guidelines, like gas cost are on spot to move the important projects in front, For instance, the gas cost ranges from $2 to $2.50, which is an encouraging cost for both power production and petrochemicals. As a result, the puts more effort so as to monetize

its abundant gas source. Also, the countries development is starting to improve and draws overseas trade in the oil and gas sector and also power production. The imports are now over 80% which create a huge latent for the native refining and hence there is a chance for possible uptake by their neighbouring nations.

How the industry is striving to achieve sustainable processing and refining operation

Since oil industry in Nigeria is one of the largest source of income then it is being driven from being a ‘cash cow' to be a path for economic development and countries growth failure to change the oil and gas sector will lead to squandered chances hence affecting the visions for making maintainable growth. . The following are the ways of improving the industry.

Articulating a key petroleum strategy and legal agenda as a tool for national growth way

So as to invite investment to the oil industry, rules and regulation as well as the strategy governing the firm should be clear, inclusive, transparent, accommodating and realistic. The legal agenda that is approachable to Nigeria environment will handle the following:

  • Local consumption
  • Local participation
  • Petroleum proceeds as seed capital                                                                                                                               
  • Administering of an assertive land

Political instability

 Nigeria has the most sloppy land control system. The lands are large and endowment of law for abandonment and withdrawal are not comprehended. The present system and planned oil industry bill contains requirements which need a mandatory abandonment of half the land after a period of ten years, or surrendering the leased areas or withdrawal for good .if the aim is for better native contribution and general improvement of the industry, then the nation should apply drop by abandoning the unproductive lands and give them to the interested persons. 

Restructuring funding of oil processes

 The petroleum industry in Nigeria is run by the nation through the joint ventures. The recent plan is to provide funds to the industry (Achikeand Onoja, 2014). This is by ensuring

that IJVs becomes self-funded so as to fund the oil company since it is owned by the government through JV,

Other way includes:

  • The building of all infrastructure that is needed to conduct petroleum processes.
  • Creating surplus crude bill oil technology growth fund and the Niger development company.

Energy generation and processing

Based on Adhekpukoli,E. (2018, pp 1-6) Energy generation in Nigeria remains a crucial thing for less expensive electricity. From the data given by EIA it displays that there is improved energy generation over the years. Though Nigeria is lagging behind in the energy generation as compared to other countries like Brazil, South Africa etc. it is noted that there has been an increase especially in 2015 compared to another year. The investment of the energy produced has increased prior to the financial problems since it rose from 295$ to828$. Though there are barriers which hinders the efficiency of energy generation which include policy problems, regulatory barriers, inadequate instructional framework, lack of information, and lack of manufacturing local base, inadequate finance and inadequate capacity. The most significant environmental effects of energy generation are: the change in climate because of emitting greenhouse gases, leads to health problems due to pollution of the air, gasses and particles. And problems brought about by waste kept and occurrence of accidents.

An image showing the generation of energy and processing (Onakoya et al., 2013)

Energy production in Nigeria is got via decentralized and centralized systems. The centralized organization is linked to the countries grid for transmitting and distributing to customers whereas decentralized is alone and not linked with countries grid.

Environmental impact of greenhouse emission

Based on Ajugwo (2013.pp 6-8) the global largest threat is change in climatic condition and how the resources are being depleted. It's thought that Africa has great issues in environmental degradation due to experienced climatic changes compared to the best part of the world. Greenhouse emission e.g. sulphur dioxide, carbon dioxide are some of greenhouse

Improving the Nigeria oil industry

Effect gases (Achike and Onoja, 2014). Fossil fuels and the products from chemical industry, agriculture as well as other technological methods that can affect the environment destroying both flora and fauna life. 


Gas flaring has been the main cause of pollution which results to GHG production and loss of money.CNG fuel produces less greenhouse gases which lead to improved environment compared to diesel and gasoline cars. Since carbon dioxide production from greenhouses lead to less social and industrial development, low energy need and unproductive economy and thus should be reduced so as to significantly achieve the country’s economy. And also the use of CNG fuel. The air that is emitted from the greenhouses leads to land change, deforestation and also leads to displacements (Ajugwo, 2013).

Global economy and fluctuating prices

The international oil prices is unpredictable and very unstable.  There is a relationship between the oil prices and the economy of Nigeria (Abdalla 2013). There is a significant positive change coming from the oil cost to the final exports. Since the oil prices have been low, for Nigeria to achieve high oil prices it should increase the amount of oil exports which will in turn raise the entire exports. In the year 2015 the crude oil price was lower compared to the year 2014. In the year 2016 it had a negative impact on the economic growth. The economic development of Nigeria depends on the cost of oil. The cost of the oil have a crucial impact on the actual domestic goods money supply and also lead to unemployment.

Table illustrating the Nigerians economy (Abdalla, 2013, pp.10-20)

year

2012

2013

2014

2015

2016

GDP, current prices

461

515

581.9

597.8

661.4

GDP nominal growth

11.68

_

-

_

_

GDP per capita current cost

2835

3082

3416

3677

_

actual GDP growth

4.3

5.4

6.2

5.6

6.5

Renewable energy to replace fossil fuels

According to Oyewo et al, (2017.pp14-16) The largest problem that faces Nigeria is the energy segment, Nigeria is an oil-rich nation and the energy consumption comes from non-renewable energy for example coal, the natural gas most important. Nigeria has an access to renewable sources of energy and also a master blueprint for the renewable energy. Changing from non-renewable to renewable sources of energy has brought great impact to the rural lives, reduction of pollution, climate change modification and also has led to energy modification. Renewable energy cannot contend with fossil fuel in terms of price value. The gaps are becoming smaller and smaller in major increment in the energy competency.

There is need for investing capital but prices has always gone to greater extent in the last down five years the developing chances for the renewable energy in Nigeria is clear as pave for the technologies such as increased solar power which are coming ad competitors in

Clear and transparent regulation

oil production. Renewable energy potential increases the capacity of energy in Nigeria (Alabi, 2006).

Nigeria has the greater number of renewable resources and the government support is also high. The potential for Nigeria going to use of renewable sources of energy is very high. This renewable sources of energy include;

Solar energy, wind energy, and hydroelectric power. Wind energy uses the air current in incorporated turbines to generate electricity. Hydroelectric power in Nigeria is approximated to be over 36,000GWh which consists of about eight thousand MW of large electric power. Solar energy is the energy that is harnessed from the sun and the heat that's harvested directly from the sun via voltaic cells.

Use of petrochemicals

According to Ren and Patel (2009, pp 513-528), Petrochemicals are chemical products that come from petrol. The chemical products that are manufactured from petrol products are also derived from fossil fuels e.g.  Coal and also natural gas. The two common petrochemical classes are aromatics and olefins

Summary of uses of petrochemicals

Petrochemicals are composed of basic feedstock which includes; propylene, butadiene, ethylene, p-xylene, and benzene. There are also some intermediates such as acetic acid, ammonia, acrylonitrile among others. The final products that are made from the feedstocks. Petrochemicals are used in; clothing, health, food, shelter .transportation as well as in communication.

Oil Spills

According to Nwilo and Badejo (2005, pp. 567-570), Oil spills event has resulted in different areas along Nigerian coastal areas. Within a given time the oil spillage has made approximately 2,369,470 barrels of oils into the ecosystem.

Table 1 - Reported oil spills between the years 2013-2017 (Nwilo and Badejo, 2005, pp. 567-570).

Year

Total number of  reported spills

Quantity in barrels

2013

339

59,272

2014

390

-

2015

319

-

2016

637

84,072

2017

412

120,976


The main cause of oil spill in the Niger delta includes the vandalism of oil pipes by the by the citizens. When people steal the oil and when they destroy materials and illegal refining cause environmental hazard. From the data gathered per year in the report tells us about the spill range of oil. Oil spillage is one of the disaster that has developed a great loss of Nigeria revenue per year. Proper mechanism must be employed in order to prevent such state loss. The citizens must also know that they also generate revenue from the same and they must learn on how to take care of the oil pipes (Ani et al, 2015).

Oil spill picture (Nwilo and Badejo, 2005, pp. 567-570).

Management of highly complex and versatile refinery operations

Investment in energy generation

 Oil is the most important global income and thus plays a major role in any economy of the world. The production, refinery, investigation and also oil distribution. Seminars have been employed to help people to understand more about oil production. The chemical part of petroleum and the process of the oil refinery and importation and exportation (Anyaehie and Areji, 2015.p87) the method of refining operation management chains various operations in management platform in order to highlight various features of an oil refinery and making the good.

The methods entail operation management, product management, unified supply chain asset performance management. Operation in refining management has been found to improve the capital even up to 5% and also reduce the operation at a higher percentage. There are certain values of refining operations management which include;

  • The maximization of the refinery profit by bringing together best methods of chain supply operations, production, and management of the assets.
  • Optimization of the whole value chain from working business perceptions with the company applications in the process of process optimization, power performance, mobile labour force and management performance.
  • Revenue improvement around 5% and the reduction of the processes costs to about 10% of the firm performance in the information technology for many oil and gas industries.
  • Increased setups excellence through the concert and benchmarking throughout the innovativeness.
  • Sustenance by qualified teams to make sure it is continuous as well as high-quality clients to reduce the general charge of ownership.

Conclusion

In conclusion, the paper highlighted some facts on the oil production in Nigeria, the challenges in oil industries and the way to solve them. The paper also highlights issues on Nigeria energy sector. It also discussed various procedures that have been put by the government over the years in order amend the oil gas industry. There have been very little achievements despite the effort put.

 It is also seen that Nigeria is amongst those countries that have contributed to the great export of the oil to other foreign nations. The GHC emission affects the economic growth which leads to pulling the nation behind. Therefore Nigeria should develop new technologies to adjust to climatic changes. The varying crude oil cost has brought to several effects on the economic growth 

References

Abdalla, S.Z.S., 2013. Modelling the impact of oil price fluctuations on the stock returns in an emerging market: The case of Saudi Arabia. interdisciplinary Journal of Research in Business, 2(10), pp.10-20.

Achike, A.I. and Onoja, A.O., 2014. Greenhouse Gas Emission Determinants in Nigeria: Implications for Trade, Climate Change Mitigation and Adaptation Policies.

Adhekpukoli, E., 2018. The democratization of electricity in Nigeria. The Electricity Journal, 31(2), pp.1-6.

Ajugwo, A.O., 2013. Negative effects of gas flaring: The Nigerian experience. Journal of Environment Pollution and Human Health, 1(1), pp.6-8.

Alabi, M.O.A., 2006. Law Making in Pre colonial Yoruba land. The Yoruba in Transition, edited by Toyin Falola and Ann Genova, available at www. unilorin. edu. ng/publications/Law Making in Pre-Colonial Yorubaland. pdf.

Alley, I., Asekomeh, A., Mobolaji, H. and Adeniran, Y.A., 2014. Oil price shocks and Nigerian economic growth. European Scientific Journal, ESJ, 10(19).

Ani, A.O., Chikaire, J.U., Ogueri, E.I. and Orusha, J.O., 2015. Effects of Oil Spillage (Pollution) on Agricultural Production in Delta Central Agricultural Zone of Delta State Nigeria. International Journal of Environmental Sciences, 4(2), pp.75-80.

Anyaehie, M.C. and Areji, A.C., 2015. Economic diversification for sustainable development in Nigeria. Open journal of political science, 5(02), p.87.

Atakpu, L., 2007. Resource-based conflicts: challenges of oil extraction in Nigeria. In European Conference hosted by the German EU Council Presidency (March 29 and 30), Berlin, Germany.

Edeh, H.C., Iloka, E.C. and Nnamani, A.U., Impact of Oil Price Volatility on Investment and Human Capital Development in Nigeria.

Gaonkar, N. and Vaidya, R.G., PHYSICAL PROPERTIES OF BIODIESEL: DENSITY AND VISCOSITY. RENEWABLE ENERGY SYSTEMS, p.163.

Lin, B., Wesseh Jr, P.K. and Appiah, M.O., 2014. Oil price fluctuation, volatility spillover and the Ghanaian equity market: Implication for portfolio management and hedging effectiveness. Energy Economics, 42, pp.172-182.

Okoro, O.I. and Chikuni, E., 2017. Power sector reforms in Nigeria: opportunities and challenges. Journal of Energy in Southern Africa, 18(3), pp.52-57.

Ogboru, I., Rivi, M.T. and Idisi, P., 2017. The Impact of Changes in Crude Oil Prices on Economic Growth in Nigeria: 1986–2015.

Omeje, K., 2017. High stakes and stakeholders: Oil conflict and security in Nigeria. Routledge.

Onakoya, A.B., Onakoya, A.O., Jimi-Salami, O.A. and Odedairo, B.O., 2013. Energy consumption and Nigerian economic growth: An empirical analysis. European Scientific Journal, ESJ, 9(4).

Onojake, M.C. and Frank, O., 2013. Assessment of heavy metals in a soil contaminated by oil spill: a case study in Nigeria. Chemistry and Ecology, 29(3), pp.246-254.

Oyewo, A.S., Aghahosseini, A. and Breyer, C., 2017. Assessment of energy storage technologies in transition to a 100% renewable energy system for Nigeria. In 11th International Renewable Energy Storage Conference (IRES 2017), Düsseldorf, March (pp. 14-16).

Popoola, L.T., Grema, A.S., Latinwo, G.K., Gutti, B. and Balogun, A.S., 2013. Corrosion problems during oil and gas production and its mitigation. International Journal of Industrial Chemistry, 4(1), p.35.

Ren, T. and Patel, M.K., 2009. Basic petrochemicals from natural gas, coal and biomass: Energy use and CO2 emissions. Resources, Conservation and Recycling, 53(9), pp.513-528.

Srinivasan, R., 2007. Artificial intelligence methodologies for agile refining: an overview. Knowledge and Information Systems, 12(2), pp.129-145.

Ubani, E.C. and Onyejekwe, I.M., 2013. Environmental impact analyses of gas flaring in the Niger Delta region of Nigeria. American Journal of Science and Industrial Research, 4(2), pp.248-262.

Wilson, G., 2014. The Nigerian state and oil theft in the Niger Delta region of Nigeria. Journal of Sustainable Development in Africa, 16(1), pp.69-81.

Nwilo, P.C. and Badejo, O.T., 2005, May. Oil spill problems and management in the Niger Delta. In International oil spill conference (Vol. 2005, No. 1, pp. 567-570). American Petroleum Institute.

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