Introduction

No commodity plays a more vital role in economy of the developing countries of

the world than oil and gas. For a nation with enormous oil deposits such as Nigeria,
oil is the basis of economic life. Oil exports provide not only a large share of
national income, but are also the main foreign exchange earnings. Thus, oil
represents a great asset which could potentially provide all the capital necessary for
Nigeria economic development.

Oil is important to the day to day existence of human being. Crude oil can be
compared to the palm tree. This is because every part of crude oil is important and
useful. Without crude oil we can neither have roads nor the clothes we are wearing
that are needed for the convenience of mankind.

Petroleum Defined
The word ―Petroleum‖ came from Latin which means ―rock oil‖. It is also
mineral oil or rock oil because crude oil is found in rock. It is customarily used to
identify two closely related compounds – natural gas (methane) and oil.
Petroleum or crude oil is a naturally occurring, toxic, flammable liquid consisting
of a complex mixture of hydrocarbons of various molecular weights, and other
organic compounds, that are found in geologic formations beneath the earth's
surface. Put simply, it is a form of naturally occurring liquid substance found in
rock formations. It consists of a varying mixture of hydrocarbons of different
weights, plus other organic compounds.

The term petroleum is however more generally used for the liquid form, also
commonly called crude oil. This is the most widely utilized type of petroleum. The
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term oil is used loosely to refer to petroleum in many cases and it usually means
the same thing as crude oil unless the meaning is expanded in particular situations.
Petroleum is a compound mainly containing hydrogen and carbon, and is
commonly called hydrocarbon. It can exist in gaseous, solid and liquid form and
has weight. When it is found as a solid, it is could be coal, shale, tar sands or
bitumen. In liquid form it is referred to as crude oil. Hydrocarbons in gaseous form
are known as natural gas.

Todd M. Doscher, a Professor of Petroleum Engineering, University of Southern

California, opined that natural gas is formed from water-dwelling microorganisms.
It is a natural resource which has been formed as a result of the continuous
processes of organic materials under the soil over a long period of time. It is a type
of mineral resources but with a distinct character because of its components. It is
not formed by the direct acts of humans but from ancient organisms that died and
were buried under layers of accumulating sediment.

The most commonly known hydrocarbon is crude oil which as stated earlier may
refer to as petroleum. The lighter a crude oil the more qualitative it is and the
higher the demand for it and as such the more commercial value and revenue that
accrues from it. On the other hand, the heavier it is the less commercial value, the
quality and the demand for it, and as such the less revenue from it. Nigeria has one
of the best crude in the world. This is because the oil is light and therefore it is in
very high demand.

However, from a technical point of view, the term petroleum covers other types of
hydrocarbons. There has also been a statutory definition of petroleum under the
Petroleum Act of Nigeria which provides that petroleum means ―mineral oil (or
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any other related hydrocarbon) or natural gas as it exists in its natural state in
strata, and it does not include coal or bituminous shales or other stratified deposits
from which oil can be extracted by destructive distillation.

Furthermore, ―crude oil is defined in the Act as ―oil in its natural state before it
has been refined or treated (excluding water and other foreign substances)‖. Natural
gas means ―gas obtained from borehole and well consisting primarily of
hydrocarbon

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ENERGY AND THE DISCOVERY OF OIL

The importance of petroleum today is due largely to the fact that it is a source of
energy. Energy can be said to be the capacity for doing work or something. It can
be said to be the force behind every activity. Energy is basically what makes things
function.

―Without energy the wheels of industry will not turn. No cars, trucks, trains, ships
or airplanes would be built. Without energy, houses would remain cold and
unlighted, food would be uncooked. Without energy resources we would literally
be back in the Stone Age. Energy is the underlying factor behind every type of
activity or action. For this reason, the development and future of any society is
dependent on its ability to have access to the energy it needs. Therefore one finds
that the energy consumption of any of the developed countries is several times
more than that of the average developing country. For example, the energy
consumption of the United States of America is several times more than that of
Nigeria because America as an industrialized nation needs energy for production.
As a matter of fact, every machine use for production needs energy to function.

The gap between the highly developed nations of the world and the less developed
depends almost entirely on the relative availability of energy between the two
societies. In effect, the more developed a nation, the more energy it uses. Oil and
gas have been given serious attention by many people because of its growth as a
source of energy in the world. Thus, any nation whose energy needs are not being
met will have severe development problems.

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Fossil fuels are primarily burned to produce energy. This energy is used to power
automobiles, trucks, airplanes, trains, and ships around the world; to fuel industrial
manufacturing processes; and to provide heat, light, air conditioning, and energy
for homes and businesses. To provide fuel for transportation, petroleum is refined
into petrol, diesel fuel, aviation fuel, and other derivatives used in most of the
world‘s automobiles, trucks, trains, aircraft, and ships.

Sources of Energy
The conventional sources of commercial energy include coal, oil, gas, hydro-
electricity, nuclear, wind, etc. on the other hand, there are the traditional or non-
conventional sources of energy, these include fire wood, animal dung, agricultural
wastes, etc. non-conventional sources of energy are those which are gotten from
reliable energy forms, such as solar, wind, wave energy or bio-mass (plant and
animal waste as fuel).

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HISTORY AND DEVELOPMENT OF OIL

The existence of man in society is founded on the resources available in his

environment. These resources have to be discovered and then employed for human
use. Most of these resources are natural, which means that they occur without any
direct input of man. These resources have to be properly utilized for the purpose
for which they are suited. Oil has been in existence for long and has been utilized
by man for over 5000 years.

It should be noted that the use of oil has changed over time in the world right from
its early discovery through its development to the present age. Oil in general has
been used since early human history to keep fires ablaze, and also for warfare.
Ancient Persian language tablets indicate the medicinal and lighting uses of
petroleum in the upper echelons of their society. Ancient China was also known to
burn skimmed oil for light. It was recorded in the bible that it was used to build the
ark and the walls of Jericho. Genesis 6:14 (NLT) reads ―Build a large boat from
cypress wood and waterproof it with tar, inside and outside. Then construct decks
and stalls throughout its interior. This scripture simply shows that Noah built the
ark with tar.

It will be realized that Drake‘s success in 1859 marked the beginning of the rapid
growth of the modern petroleum industry. Soon petroleum received the attention of
the scientific community, and coherent hypotheses were developed for its
formation, migration upward through the earth, and entrapment. With the invention
of the automobile and the energy needs brought on by World War I (1914-1918),
the petroleum industry became one of the foundations of industrial society. As the
world‘s consumption of oil rises, the quest to have more reserves of oil increased
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and consequently it has led to more drilling effort by many countries in different
parts of the world through the available scientific and technological means.

During the late 19th and early 20th centuries, the oil industry concentrated on
extracting kerosene from crude oil for lamps and stores. In 1870, John
Rockefeller and a few associate incorporated the Standard Oil Company which
dominated the kerosene market until competitors appeared. Its use as lubricant also
began to be developed at this time. However, more important was the development
of crude oil as a boiler fuel which soon became competitive with other established
energy forms, particularly with coal in locomotives and ships.

In 1890, a large oil field was discovered in Russia. During this period advances
were made in refining which extended its use as a fuel for car and aero engines.
The large-scale conversion of navies and merchants fleets to oil from coal helped
to provide oil with an important boost. As kerosene lamps gained popularity, the
refining industry grew in the area. In the first quarter of the 20th century, the
United States overtook Russia as the world's largest oil producer. By the 1920s, oil
fields had been established in many countries including Canada, Poland, Sweden,
the Ukraine, the United States, and Venezuela. With this rapid advance, by the
1930s oil began to compete with coal as the chief energy source for the world‘s
industries. World consumption of oil rose to about one million barrels a day by
1940.

However, it was during the World War II era that there was much discovery of oil.
In 1947, the Superior Oil Company constructed the first offshore oil platform off
the Gulf Coast of Louisiana. It was in the post – World War II period of
reconstruction and growth ending in the 1960s that oil overtook coal‘s predominant
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position in world energy consumption with total oil production reaching over 20
million barrels per day. Oil and Gas Law – JIL 315 7 Comrade Wisdom Notes

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REFINING AND USE OF CRUDE OIL

In a world hungry for oil and gas, oil is being produced in nearly over 80 countries
of the world and Africa has emerged as the hotspot for production and exploration
of crude oil. The Middle East country has almost 57% of the world crude oil
reserved, and Nigeria has emerged as one of the largest producers of crude oil.

Also the new discoveries of crude oil in countries like Uganda, Ghana and the Gulf
of Guinea (Sao Tome Principe) has continued to make the oil industry very
exciting, relevant and futuristically significant especially in Africa.

Use of oil has continued to expand on the residential and commercial fronts in the
United States with more than 26.8 million customers using crude oil for heating in
the 1980s. In Nigeria since the 1980s, there has been increasing utilisation of crude
in Nigeria, for power generation, industrial heating, fertiliser and petrochemical
manufacturing and as feedstock for direct steel production.

By itself, oil in its unrefined form has little or no direct use. It only becomes
relevant and useful when its hydrocarbon nature is broken and is mixed with other
chemicals in a refinery to produce products that can be marketed. It is in its refined
nature that the wheels of oil industry can turn, and cars, trains, ships, airplanes can
be built and used, that houses can be lightened, and food can be cooked, or else the
world will turn to the days of ancient (that is, the Stone Age).

Oil in its refined state is useful in many ways such as petrol for cars, otherwise
known as Premium Motor Spirit (PMS), aviation fuel, diesel, Kerosene, synthetic
rubber, bitumen for roads, tar for ships, medicine, lubricants, grease, jellies. It is
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safe therefore to say that the value of a crude oil is directly related to the yield of
useful products each barrel will produce as it passes through a refinery. Tens of
thousands of different products can be derived from crude oil.

Crude oil and the natural gas are the most important sources of energy in the world
today. In general, crude oil once refined, yields three basic grouping of products
which are produced when it is broken down into fractions. The valuable top gives
the gas and gasoline (sometimes referred to as white products) which is used for
domestic purposes, aviation and motor fuels and also as feed-stocks for petro-
chemical industries. For example, Naphtha which is extracted from both the light
and middle range of distillate cuts is used as a basic feedstock for other products,
particularly in the improvement of gasoline quality for car engines. The middle
part gives us kerosene, heating oil, diesel and waxes and lubrication oil, while the
lowest part is used for electricity generation purposes, industrial boilers, water
proof, bitumen or asphalt used for road construction, and the product for ship
furnaces as well as roofing materials.

The individual quality of a crude oil is also a determinant of its yield. In other
words, the actual proportions of lights, medium and heavy fractions that exist
naturally in a barrel vary enormously from one crude oil to another. For instance,
light North African crudes from Algeria or the Libyan Jamahiriya have high yields
of light and middle distillates, while heavy crudes may yield almost no light
product, with heavy fuel oil and residue accounting for over 80 per cent of a barrel
in certain cases.

However, what a refinery extracts from a barrel of crude oil and how it divides the
cuts it takes from a barrel depends on its processing facilities and plants known as
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the configuration which is usually built as far as possible to meet specific demands
for particular markets. A refinery configuration is therefore influenced by the
specific demands of a market as well as the availability and price of different types
of crude oil. A refinery configuration is very expensive with high technology
equipment and at the same time very dynamic which can be summed to say it is
not a child‘s play. It must be carried out with utmost sense of responsibility.

A refinery by standard has a life span of up to 20 years. However, by continuous

upgrade, it can be made to be viable to the changing or dynamic patterns or crude
oil production technology.

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