ABSTRACT
Active participation of the federal government in the upstream sector started in 1971 through the acquisition of equity interest in major oil producing companies. The government, through its various actions and policy initiatives, demonstrated the need for indigenous entrepreneurs to participate in both the upstream and downstream sectors of the petroleum industry. This was a deliberate attempt to infuse Nigerian participation in the sector. Although NNPC participated in the sector through JVs, revenue derived was mainly from the disposal of equity crude oil, royalties and taxes. It is important to indicate, however, that total expenditure in the upstream sector is approximately $12 billion. The JV partners benefited directly from the expenditures in the sector because some major contracts for services and equipment for oil exploration and production were awarded to their affiliate companies. Through active participation the MNCs as well as OSCs were able to channel a significant proportion of the upstream expenditures to their parent companies overseas. Nigerian participation was extremely low and this was attributed to low experience, low level of technical skills and inadequate investment capital. Over the years, professional skills in core engineering, geology, reservoir engineering, geophysics, instrumentation etc. among Nigerian professionals have increased. This notwithstanding, MNCs continued to award contracts for basic procurements, Front End Engineering Design (FEED), conceptual design, fabrication etc. to companies offshore. This practice without doubt created an unfavourable business climate for Nigerian entrepreneurs. Consequently, an estimated $12 billion expenditure in the upstream sector failed to stimulate and impact on the local economy. In essence, the huge repatriation of earnings from the upstream sector stifled the employment objectives of the government.
