UPSTREAM

With proven oil and gas reserves of about 32.5 billion barrels and 187 trillion cubic feet respectively,
numerous investment opportunities abound in upstream operations of the Nigerian Petroleum industry. The
upstream exploration activities are currently held around three major basins: the onshore Anambra, the
offshore Benin/Dahomey (deepwater and ultra-deepwater) and the Niger Delta (shallow and deep offshore
basins). The Niger Delta and Benin basins are known to be the richest basins in Nigeria and hold the vast
majority of reserves, and the source of a large portion of current production. Just before the turn of the
millennium, exploration activities focus turned to the frontier basins of the offshore areas, with promising
potentials. These ventures became very attractive with advances in technologies that aid deepwater petroleum
exploration and production.
Upstream Ventures:
1. Exploration
2. Oil production
3. Gas production
4. Joint ventures activities
5. Joint operating activities

DEEPWATER EXPLORATION

from the very beginning of oil exploration in Nigeria in 1937, till early 1993, virtually all exploration and
production activities were restricted to land and swamps. Where prospecting ventured offshore, it was in areas
not greater than 200m water depth.
But then in 1993, the Federal Government opened up a new frontier in oil and Gas exploration, heralding the
bright prospects of a promising future, by allocating some offshore blocks in water depths reaching 2500m.
These deep water depths and plans for even greater depths than 2500m will undoubtedly impact positively the
country’s production and reserve blueprint. Though these deep water operations are technically challenging
and massively capital intensive, experience multinational companies have been awarded some deep offshore
blocks and even ultra-deep concessions. By the end of 1998, the deep water operators in Nigeria had achieved
the following:

 Acquisition of21,000 km 2D Seismic Lines

 Acquisition of21,500 km 3D Seismic Lines
 Drillingof33 exploration/appraisal wells in depths ranging from 300-1460m.

Even better news is significant discoveries reported by most of the operators. Little wonder then, that against a
commitment of $864 million USD for the first 6 (six) years of deep water prospecting under a PSC (production
sharing contract) the industry has invested approximately $1.3 billion USD up to the end of 1998.

Operators have, indeed, continued aggressive exploration activities virtually in spite of the volatile global
petroleum atmosphere of recent times, and long lead times from discovery, production and sales.

The technical challenges of deep and ultra-deep water depths have meant a number of less than 20 wells drilled
worldwide in water depths greater than 1000m. Expectedly, since most of the deep water activity in Nigeria is
in, so called, virgin territory, thereby lacking infrastructural support and services, the cost of prospecting is
extremely high.

2. oil production
NNPC upstream operations are in joint partnerships with the major oil companies. These multi-national
Exploration and Production (E & P) companies are operating predominantly in the on-shore Niger Delta,
coastal offshore areas and lately in the deep waters. As with many other developing countries, the
multinationals in Nigeria had been operating under what is called a concession system, with NNPC being the
concessionaire, while the companies are the operators. NNPC also is responsible for the management of the
exploration bidding rounds for oil and gas.

The multinational oil companies operate in partnership with NNPC under Joint Operating Agreements (JOAs)
or Production Sharing Contracts (PSCs). Others, especially the indigenous oil companies, operate in
partnership with international companies under sole risk or as independents. Nigeria's petroleum industry is
well grounded in successful exploration, beginning with the first commercially viable discovery at Oloibiri in
the Niger Delta in 1956, with a modest production rate of 5,100 barrels per day. Reserves of crude oil stand at
28.2 billion barrels. Natural gas reserves total 165 trillion standard cubic feet (scf), including 75.4 trillion scf of
nonassociated gas.

An important ingredient in NNPC's exploration success is the Integrated Data Services Ltd (IDSL), a
subsidiary of NNPC. IDSL is one of the largest and most advanced earth science facilities in Africa. Field data
is sent to IDSL for analysis using advanced computer systems, giving the company the critical edge in its
upstream operations. IDSL processes and interprets in 3-D configurations data from the hydrocarbon
reservoirs. This technological capability is instrumental in developing reservoir management strategies, which
provide optimum recovery rates over the life of a field.

IDSL has been responsible for most of the country's major oil discoveries and is continuing an intensive
exploration programme to increase the nation's hydrocarbon reserves.

RODUCTION
With a maximum crude oil production capacity of 2.5 million barrels per day, Nigeria ranks has Africa's
largest producer of oil and the sixth largest oil producing country in the world. Nigeria appears to have a
greater potential for gas than oil. Nigeria's gas production in the year 2000 was approximately 1,681.66 billion
scf, 1,3715 billion scf was associated gas and the rest 310.16 billion was non associated gas.

Nigeria produces only high value, low Sulphur content, light crude oils - Antan Blend, Bonny Light, Bonny
Medium, Brass Blend, Escravos Light, Forcados Blend, IMA, Odudu Blend, Pennington Light, Qua-Iboe Light
and Ukpokiti.

NNPC through its subsidiary the Nigerian Petroleum Development Company (NPDC) is directly responsible
for four oil and gas fields with a total production of 15,000 bpd.

NPDC is committed to expanding its production capacity and has thus entered into strategic alliance with Agip
Energy to develop the Okhono offshore field.

The Nigerian Gas Company, a subsidiary of NNPC transmits gas to major commercial centres in the country.
The Escravos -Lagos pipeline feeds the commercial nerve-centre of the nation, as well as fuelling the main
power station at Egbin, near Lagos.
 Gas Production
NNPC's vision is to make Nigeria the leading Liquefied & Natural Gas (LNG) producing nation in the world
and to promote sufficiency in the domestic power supply. 

We intend to achieve this goal by monitoring the commercialization of Nigeria’s abundant natural gas

reserves, reducing gas flaring, promoting viable LNG projects, power plants and associated gas projects.

The Federal Government has set the following objectives for NNPC as regards Gas production:

 To monitor and expedite the commercialization and the development of Natural Gas for Domestic and
Export markets 
  To protect the Federal Government interest in LNG & IPP ventures 
 To monitor and support all LNG and Independent Power Plants (IPP) ventures
 To support NNPC Human Resource capacity building
 To work towards achieving and sustaining “zero” flaring of Associated Gas
 Promote the Nigerian Content initiative

Joint venture Activities

NNPC upstream operations are in joint partnerships with the major oil companies. These multi-national
Exploration & Production companies are operating predominantly in the on-shore Niger Delta, coastal offshore
areas and lately in the deepwaters.
 
As with many other developing countries, the multinationals in Nigeria had been operating under what is
called a concession system, with NNPC being the concessionaire, while the companies are the operators. 

NNPC also is responsible for the management of the exploration bidding rounds for oil and gas.

The multinational oil companies operate in partnership with NNPC under Production Sharing Contracts (PSCs

Joint operating Agreement

The Joint Operating Agreements (JOA) is the basic, standard agreement between the NNPC and the operators.
It sets the guidelines/modalities for running the operations. It is different from the MOU. While it contains the
basic understanding on the joint Venture, the MOU is a response to the specifics of fiscal incentives.

THE MAIN PEGS OF THE JOA ARE:

One of the partners is designated the operator. The NNPC reserves the right to become an operator. All parties
are to share in the cost of operations. Each partner can lift and separately dispose its interest share of
production subject to the payment of Petroleum Profit Tax (PPT) and Royalty. The operator is the one to
 prepare proposals for programme of work and budget of expenditure joint on an annual basis, which shall be
shared on share holding basis.

Joint Venture Contract

Highlights of the JV Contract include:

     The participation Agreement sets out the level of participation of each party in running the affairs of
the company
     The agreement determines the interests and obligations
      The agreement ownership of production facilities, assets

Each party can opt for and carry on sole risk operations. Technical matters are discussed and policy decisions
are taken at operating committees where partners are represented on the basis of equity holding.

THE SIX JOINT VENTURES INVOLVING FOREIGN

OWNED OIL COMPANIES ARE OPERATED BY THE
FOLLOWING COMPANIES:
Shell Petroleum Ddevelopment Company of Nigeria Limited (SPDC):

A joint venture operated by Shell accounts for more than forty percent of Nigeria’s total oil
production (899,000 barrels per day (bpd) in 1997) from more than eighty oil fields. The joint venture is
composed of NNPC (55 percent), Shell (30 percent), Elf (10 percent) and Agip (5 percent) and operates largely
onshore on dry land or in the mangrove swamp.

Chevron Nigeria Limited (CNL):

A joint venture between NNPC (60 percent) and Chevron (40 percent) has in the past been the second
largest producer (approximately 400,000 bpd), with fields located in the Warri region west of the Niger river
and offshore in shallow water. It is reported to aim to increase production to 600,000 bpd.

Mobil Producing Nigeria Unlimited (MPNU):

A joint venture between NNPC (60 percent) and Mobil (40 percent) operates in shallow water off
Akwa Ibom state in the southeastern delta and averaged production of 632,000 bpd in 1997, making
 it the second largest producer, as against 543,000 bpd in 1996. Mobil also holds a 50 percent interest
in a Production Sharing Contract for a deep water block further offshore, and is reported to plan to
increase output to 900,000 bpd by 2000. Oil industry sources indicate that Mobil is likely to overtake
Shell as the largest producer in Nigeria within the next five years, if current trends continue.

Nigerian Agip Oil Company Limited (NAOC)

A joint venture operated by Agip and owned by NNPC (60 percent), Agip (20 percent) and
Phillips Petroleum (20 percent) produces 150,000 bpd mostly from small onshore fields.

Elf Petroleum Nigeria Limited (EPNL):

NNPC is in a joint venture partnership with Total E&P Nigeria in exploration and production of oil and gas.
The partnership is contracted through a Joint Operating Agreements (JOA) which is a basic, standard
agreement between the NNPC and Total in Nigeria.

DOWNSTREAM
The downstream industry in Nigeria is well established. NNPC has four refineries, at Kaduna, Port Harcourt
and Warri have a combined installed capacity of 445,000 bpd. A comprehensive network of pipelines and
Depots strategically located throughout Nigeria links these refineries. NNPC, through its subsidiary, the
Pipelines and Products Marketing Company (PPMC), supplies only to bulk customers. They, in turn, meet the
needs of millions of customers across the country for products ranging from gasoline and jet fuel to diesel, fuel
oil and liquefied petroleum gas.

NNPC produces linear alkyl benzene, benzene, heavy alkylate and deparafinated kerosene at its Kaduna
Refinery complex. Linked to the Warri Refinery are a 35,000 metric ton per annum (mtpa) polypropylene plant
and an 18,000-mtpa carbon black plant.

Downstream Ventures:

1. Retail services
2. Product distribution
3. Research and development

1. RETAIL SERVICES: NNPC Retail Ltd operations commenced in August 2002, when the first Retail
outlet was commissioned in Lagos, Nigeria to market petroleum products to the public.
 NNPC operates retail outlets with efficient service delivery of petroleum and allied products to
customers in an environmentally friendly manner. 

No of Mega/Floating/Affiliate Stations:
NNPC Retail currently operates 37 Mega Stations, 12 Floating Mega Stations and over 500 Affiliate Stations.

2. PRODUCT DISTRIBUTION; The pipelines and product marketing company (PPMC) is

the product distribution arm of NNPC. PPMC is directly responsible for the comparative ease
with which petroleum products are sourced and distributed to all parts of the country, at a uniform
price: a phenomenon which Nigerians have come to takee for granted. PPMC, a subsidiary of
NNPC, ensures, among other things, the availability of petroleum products to sustain our
industries, run automobiles and for domestic cooking. 

MODE OF OPERATION

PPMC receives crude oil from the NNPC unit called the NATIONAL PETROLEUM INVESTMENTS
MANAGEMENT SERVICES(NAPIMS). PPMC then supplies the crude oil to the NNPC local refineries
however, petroleum products are sometimes imported to supplement local production when the local
refineries are unable to process enough for the country’s needs.

Petroleum products are either imported or refined locally are received by the PPMC through import jetties and
pipelines and distributed through pipelines to depots strategically located all over called bridging to designated
retail outlets. There is also provision for using the rail system to move from some of the PPMC depots.

RESEARCH AND DEVELOPMENT

Established in 1977 to solve the operational and technical problems of the oil and gas industry through
the application of the results of scientific research and the development of technology. R&D has
highly qualified personnel and experienced engineers. 
NNPC, R&D is ISO 9001:2000 certified with upgrade to ISO 9001:2008 in progress. R&D is also in
the process of obtaining certification for ISO 14000 Environment and ISO 17025 Laboratory
accreditations.

THEIR WORK UNDER Downstream

Our capabilities here include:
Crude Assay Analyzer

Collaborative Research Services with National Oil Companies (Petrobras, Saudi Aramco,…etc), OPEC,
National Government Agencies and Independent Oil Companies (IOC)
New Businesses such as:

1. Glassblowing production 
2. Renewable Energy studies on  Biofuels and Solar energy

 Technical Services to Oil & Gas companies such as:

 Process Simulation studies using HYSIS
 Energy optimization studies
 Energy optimization studies
 Troubleshooting of plants operational problems
 Improvement of existing processes and development of new ones
 New products development in fuels, lubes, bitumen and petrochemicals
 Natural gas utilization for the production of solvents 
 Catalysts characterization
 Environmental research studies and services
 Toxicological studies
 Catalysis development 
 Air monitoring of virgin industrial are