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Chapter One: Introduction 1.1 Background of the Study

Oil exploration began in Nigeria in 1908, while record of mineral occurrences was reported five (5) years earlier, in 1903. The exploration operations were punctuated by two world wars, but eventually yielded results when sheel Bp. Bayeri discovered oil in Oloibiri in 1956 (1996:7).

Production climbed from more than 5,000 barrels per day in 1957 to 17,000 barrels per day after independence in 1960, and it jumped to 450,000 barrels per day by 1966.

Although the civil war delayed this improvement trend, by 1970, daily production had dropped to one million barrels per day. The top production level of two million four hundred thousand (2.4 million) barrels per day was reached in the second quarter of 1979.

However, prior to 1990, production had fallen to one million. Six hundred and eleven million (1.611 million) per day, both for technical grounds and in accordance with OPEC quotas, which are imposed in order to limit output and stabilise prices in a worldwide market. As of 1999, Nigeria’s OPEC quota is at 1.865 million per day, as set in 1990.

Nigeria’s oil was first marketed in 1958. DETEGE (1996, 9). Up until 1973, most global oil companies operating in the country held 100% interest in their operations, hence there was no active government involvement in Nigeria oil.

Prior to 1973, all Nigerian oil was marketed by oil producing companies via an integrated system based on their transfer price. The government’s interest in the oil business was handled by several government departments, including the hydrocarbon division in 1963 and the department of petroleum in the Ministry of Mines and Power in 1970.

Although the Nigeria National Petroleum Corporation (NNPC) was established in 1971 with the primary goal of marketing Nigerian oil, the government did not become directly involved in oil marketing until 1973. That was when the government began having its own equity participation in the operations of the oil corporations (Bayero 1996:10).

The government’s objective has been to provide suitable facilities in the downstream sector, such as refineries, distribution, and marketing of petroleum products, in order to maximise the value of our petroleum resources.

Nigeria now has four refineries, two of which are in Port Harcourt, one each in Warri and Kaduna. All refineries have a total production capacity of 445,000 barrels per day.

To ensure the supply of petroleum products throughout Nigeria, the Nigerian National Petroleum Corporation (NNPC) constructed a 300,000-kilometer (300,000-kilometer) network of pipelines that connect to seventeen (17) petroleum product depots in Nigeria.

The goal was to eliminate the country’s perennial stockpiling of petroleum products. Etefe (1997: 8).

To achieve this laudable goal in Enugu, the construction of an oil store began at Emene, which was finished and commissioned by the military administration on August 24, 1979.

The Enugu depot, originally opened in 1979, currently has a storage capacity of around twelve million mi-cubes (12,000,00m/3). It stocks only three bye products of petroleum products:

premium motor spirit (PMS), also known as petrol, dual purpose kerosene (DPK), and automobile petrol oil (AGO) or diesel, which are then distributed to her clients through oil marketing businesses.

The depot proceeded to serve the states that were under it, which included the current Enugu, Anambra, Kogi, Ebonyi, and parts of Imo, Benue, and Cross River states.

The Enugu depot, located in the Enugu East Local Government of Enugu State, serves as both a depot and a pump station. As products, and distributes them to the general public via oil marketing businesses.

However, as a company station, it was intended to feed additional depots in the Northern states, including Makurdi, Yola, Minna, and Suleja, directly from the Port Harcourt refinery via a pipeline product distribution network.

The federal government wishes to assure a consistent and reliable supply of petroleum products; therefore, efforts have been made to expand and interconnect all current refineries.

It would ensure that the country’s strategic store of petroleum products is effectively maintained by enabling for prompt replenishment of stock at all product depots, including the Enugu depot. As a result, I’m interested in studying the issues of petroleum product distribution, allocation, and marketing in Enugu.

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