This study was carried out with the aim of appraising environmental liabilities: petroleum companies compensation in Ethiope East Local Government Area of Delta State. In order to actualize the objectives of the study, various literature and theoretical issues were discussed. The instrument used for the purpose of this research was gathered through primary source. The mass of information generated from the questionnaires was summarized in form of table and analyzed using simple percentage. The researcher administered one hundred (100) questionnaires to respondents, out of which eighty (80) were retrieved for the purpose of presenting and analyzing responses to issues raise in the questionnaires. The data collected was analyzed using Z-test statistical tool. The findings from analysis revealed among other things that the petroleum companies are environmentally liable to their host communities and that the host communities are not comfortable with environmental liabilities and compensation of the petroleum companies. We therefore recommend that, the capital portion of income generated from the sales of the resources exploited from the environment should be directed towards projects that are sustainable to generate income for the future generation of the host communities.
Background to the Study                    
Statement of the Problem                        
Objectives of the Study                        
Hypotheses of the Study                        
Scope of the Study                    
Significance of the Study                    
Limitation of the Study                         
Review of Literature on Variables                         
Conceptual Framework                         
Review of Previous Studies                         
Theoretical Framework                         
The Payment of Compensation                         
Legal Framework for Compensation                    
Payment of Compensation by Oil Firms                
The Population and Sample                     
Data Collection Method                         
Source of Data                             
The Research Instrument                         
Data Analysis Method                         
Descriptive Statistics                         
Test of Hypothesis                             
Summary of Findings                         
The payment of compensation is one of the intractable problems facing the oil industry in Nigeria. The intermittent crisis between the oil firms, the host communities and the federal government could be traceable to the issue of neglect which is synonymous with the low compensation paid to the victims of negative externalities from the oil industry. These externalities are in form of oil pollution, gas flaring and other forms of environmental modification. Bearing in mind that it is difficult to engage in oil business without one form of environmental pollution, the framers of the 1969 Petroleum Act insisted that in an event of untoward modification of the environment, fair and adequate compensation should be paid to the victims. It is therefore a statutory obligation for oil firms to engage in best oil field practice to avoid polluting the environment. However, evidence on ground would seem to suggest that the issue of compensation is a thorny one (Aghalino, 2005).
Opinions are divided on the adequacy or otherwise of the compensation paid by the oil firms to the victims of oil spillage. On the one hand, oil firms claim that they are paying adequate compensation. Indeed, it is asserted that they pay rates higher than the official ones. On the other hand, host communities insist that the rales paid by oil firms are not just enough and that the oil firms violate existing regulations in the payment of compensation.
The oil-bearing areas of the Niger Delta have the largest mangrove forests in Africa and the third largest in the world (Babatunde, 2010).
The inhabitants of the area derive a wide range of natural resources from the mangrove forest; including herbal medicine, fish, timber, and vital ecosystem services like stable soil and a flourishing habitat for a variety of wildlife, such as several endangered species, such as the Delta elephant, the white-crested monkey, and the river hippopotamus. In other words, the Niger Delta mangrove provides the means of sustenance to the people, who live largely on a subsistence basis. It also provides an important spawning habitat for Nigeria’s commercial fisheries (Babatunde, 2010).
However, the advent of oil production in the Niger Delta has led to deforestation and ecological degradation, threatening the renewable natural resources and the ecosystem services in a number of ways. The oil-bearing areas have faced so many environmental problems caused by pollution arising from oil activities such as drill cuttings, drilling mud, fluids used in production, chemicals injected to control corrosion or to separate oil from water, and general industrial waste. Added to this are problems of gas flaring and incidents of oil spills and blow outs (Aworawo, 1999). While spills inevitably accompany oil production, in Nigeria they occur with an alarming frequency and magnitude because most of the oil delivery infrastructure is obsolete and inadequate. Also, sabotage of pipelines is a persistent problem, and spills and pipelines leaks are poorly monitored and often not reported and repaired on time.
In addition, oil exploration and production are linked to poorly designed causeways and canals that the oil industry uses. These affect the hydrology of the seasonally flooded fresh water swamp and the brackish water of the mangrove forest, killing crops, destroying fishing grounds and damaging the drinking water supply (Babatunde, 2010).
While it is evident that the environmental effects of oil production are great, it is important to point out that there are also some environmental problems not related to oil exploitation. United Nations development report on the Niger Delta (UNDP, 2006) identified certain environmental problems that are not attributable to the oil industry activities, but rather a result of the natural terrain and hydrology of the Niger Delta. They are flooding, siltation, occlusion, erosion and the shortage of land for development. However, oil-related environmental effects compound and overshadow these others.
The Niger Delta region is a sensitive and fragile ecosystem. In spite of this vast resource endowment and its immense potential for socio-economic growth and contributions to the overall development of Nigeria, the oil-bearing areas within the Niger Delta remain under threat from rapidly deteriorating economic and environmental conditions as well as social tensions. Some critics suggest that the situation has worsened in recent years (ANEEJ, 2004). The perception of local people living in the oil communities is that the government is acting negligently, while the valuable ecosystems on which they depend for their livelihood are devastated by oil extraction. As a result, the situation degenerates into violence and this draws a disproportionate reaction from the government, deepening the people’s resentment and sense of alienation.
In spite of the damaging impact of oil exploitation on the environment and livelihoods of the host communities, scientific data on the overall and long-term effects of oil exploitation on the area are only beginning to emerge (HRW, 1999; Nwachukwu, 1999; Aluko, 1999; Okonta and Douglas, 2001; Ukeje et al., 2002; Onosode, 2003).
Environmentalists and other experts have focused attention on the environmental degradation resulting from oil activities and a major bone of contention is the implication of the environmental impact on the livelihood of the people of the oil-bearing areas of the Niger Delta.
The importance of environmental sustainability cannot be overemphasized. This is fundamental to the people’s welfare and development as their existence to a large extent relies on subsistence endeavours, which depend on natural resources. While there have been many intricate poverty strategies that have been designed and implemented in the Niger Delta region, and while all these schemes have their own validity depending on the environment, the stark reality in the oil-bearing areas is that decades of these schemes and programmes have not mitigated the crucial problems of exclusion and human deprivation.
As a result, more germane to the survival of the indigenous people is the danger of oil exploitation obliterating their source of livelihood since they rely solely on their immediate environment for survival. Hence, anything that alters their environment threatens their very existence. Oil exploitation has created life-threatening ecological hazards and deterioration of health and social fabrics of the inhabitants of the oil-affected communities. The implication is that the oil industry has exploited the ecosystems for resources beyond the level of sustainability (Ashton-Jones and Douglas, 1998). The ecological problem is a reality that has to be tackled. This will reduce the vicious cycle of poverty and prevent the endemic social conflict that has pervaded the oil-bearing areas of the Niger Delta.
In the light of this, the researcher intends to examine the environmental liabilities; petroleum companies compensation in Ethiope East Local Government Area of Delta State.
The oil-bearing area of the Niger Delta is the richest parts of Nigeria in terms of natural resources endowment. The area has large oil and gas deposits, as well as extensive forests, good agricultural land, and abundant aquatic resources. However, the oil communities Niger Delta communities, remain marginalized from mainstream environmental, economic, social, and political activities in Nigeria. The government, both federal and state, has failed to consider the interests and human rights of the grassroots producing areas. Rather, the government continues to exclude the people and their voices in the effort to develop the country. The government lacks the political will to enact and enforce stringent environmental laws to regulate the environmental consequences of crude oil exploitation in the Niger Delta. As a result of this grave negligence on the part of the government, oil companies continue the destruction of the ecosystem of the Niger Delta region.
Against this backdrop, the following research questions were raised.
Are petroleum companies environmentally liable to their host communities?
Do petroleum companies pay adequate compensation to their host communities?
Are the host communities comfortable with environmental liabilities and compensation of the petroleum companies?
The broad objective of this study is to examine environmental liabilities; petroleum companies compensation in Ethiope East Local Government Area of Delta State.
The specific objectives are:
To determine whether the petroleum companies are environmentally liable to their host communities?
To examine if petroleum companies pay adequate compensation to their host communities?
To verify if the host communities are comfortable with environmental liabilities and compensation of the petroleum companies?
To properly guide the focus of this study, the following hypotheses were formulated:
H1:    The petroleum companies are not environmentally liable to their host communities.
    H0:    The petroleum companies are environmentally liable to their host communities.
H1:    Petroleum companies do not pay adequate compensation to their host communities.
    Ho:    Petroleum companies pay adequate compensation to their host communities.

H1:    The host communities are not comfortable with environmental liabilities and compensation of the petroleum companies.
    Ho:    The host communities are comfortable with environmental liabilities and compensation of the petroleum companies.
This research work is an empirical study on environmental liabilities; petroleum companies compensation in Ethiope East Local Government Area of Delta State.
The population of the study is the entire Niger Delta communities, while the sample size is restricted to the inhabitant of Ethiope East Local Government Area of Delta State.
The length of period covered by the study was five years (commencing from 2006, 2007, 2008, 2009 and 2010). This is to enable the researcher have an indept knowledge and understanding of the people of the area.
It is expected that this study would consolidate existing literature on the issues surrounding the relationship between environmental liabilities and petroleum companies’ compensation. The study would also facilitate the examination of the effects of environmental liabilities and petroleum companies’ compensation and thus boosting the empirical evidence from Nigeria. Furthermore, given the empirical nature of the study, the outcome of this study would aid policy makers and regulatory bodies in economic modeling and policy simulation with respect to the selected variable examined in the study.
    The result of the study would be of benefits to investment analysts, investors and corporations in examining the effectiveness of environmental liabilities and compensation. It will also be useful in stimulating public discourse given the dearth of empirical researches in this area from emerging economic like Nigeria. Finally, it would also add to the available literature on the area of study while also providing a platform for other researchers who may want to further this study.
A study of this nature cannot be carried out without constraints.
The low response rate from respondents is also a limiting factor including the imprecise measurement of variables.
The sample size and the inability to obtain a completely random sample is also a limiting factor to this research work.
Babatunde, A. (2010), Environmental Conflict and the Politics of Oil in the Oil-Bearing Areas of Nigeria’s Niger Delta, Peace & Conflict Review, Vol. 5.
Ashton-Jones, N.S.A. and Douglas, O. (1998). The Human Ecosystems of the Niger Delta. An Era Handbook. Benin City: ERA.
Awobajo, S.A. (1981). An Analysis of Oil Spill in Nigeria 1976-1980. Paper presented at the Seminar on the Petroleum Industry and Nigerian Environment organized by NNPC. November 9-12 Warri.
Aworawo, D. (1999). The Impact of Environmental Degradation on the Rural economy of The Niger Delta. In Osuntokun A. Ed. Environmental Problems of the Niger Delta. Lagos. Friedrich Ebert Foundation.
African Network for Environment and Economic Justice ANEEJ (2004). Oil of Poverty in Niger Delta. A publication of the African Network for Environment and Economic Justice.
Aghalino, S. O. (2005), Issues and Trend in the Payment of Compensation in the Oil Industry in Nigeria, 1969-1997, Akwa Ibom Journal of History and International Studies, 12(1): 186 – 208.


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    Project Details

    Department Accounting
    Project ID ACC0804
    Price ₦3,000 ($14)
    CHAPTERS 5 Chapters
    No of Pages 100 Pages
    Methodology Z Test
    Reference YES
    Format Microsoft Word