Emerging Markets Focus
Best Practices in Engaging Stakeholders in Oil and Gas Projects – The African Experience
Written by Ziwase Ndhlovu, Principal, Mukazi Consulting
African oil projects have sometimes been considered a risky proposition from an investment point of view, given a track record of unrest in the Niger Delta and political and social unrest elsewhere. On the other hand, the local communities are unhappy with the oil companies for destroying their farmland and fishing trails, and making their neighbourhoods dumping grounds for waste resulting from their operations.
Moving away from the prolific and well explored basins of West Africa, 2011 expects to see a continuation of heavy upstream investment into the more exotic basins of East Africa, with several key exploration wells planned in Kenya, Uganda, Tanzania and Ethiopia.
With the prospects of opening up new hydrocarbons producing areas, there exists the opportunity to develop and operate Oil and Gas projects in a way that reduces conflict with local government and communities, NGOs and other influential stakeholders. An engagement strategy that encompasses all influential stakeholders is necessary – this includes federal and state governments, NGOs and most importantly the local communities.
According to research by PWC, when committing millions of dollars in natural resource investments in non-OECD countries, setting up a thorough and substantial engagement strategy increases chances of success by over 50%. This allows the project owner to be better planned, by already considering potential issues that could have an impact on Project timelines, schedules and ultimately the costs associated with developing it. This article will discuss various ways of handling the key stakeholders that will have an influence on the success of your project.
Government- Federal and Local Government
After securing a license with government, engagement continues throughout your company’s presence in that country. A list of best practices is below:
Identify the prominent political and cultural structures present at the country level and determine the relationships with the local government. In some countries, the local governments are mandated to regulate Oil operations in their state, reporting to the federal government. As an investor one must make sure they correctly identify which government entities look after certain activities, e.g. identify the department collecting payments for different sections in order to avoid paying certain fees more than once
Identify the key approval bodies and individuals authorised to make decisions. An investor must understand how these bodies make decisions on various issues, from extending the duration on a current exploration permit, or upgrading an exploration license to a production and development license.
Identify early on which departments handle granting and renewal of licenses and the timelines experienced in granting these documents. Will it be Ministry of Energy, Natural Resources or Ministry of Lands as the case may be?
If a signature bonus is to be paid, clearly know to whom the payment is made, and make sure a recordable account of it is made to ensure transparency to regulatory bodies and in some cases NGOs like “ONE”- that try to make sure that natural resource payments are transparent and understood by concerned parties
Identify the department that handles transfer of interest to other parties- either via farm-out transactions and corporate transactions. In most cases governments seek some form of payment before a transfer of legal title can be approved.
Local Communities
In most areas where Oil and Gas projects are undertaken in Sub-Saharan Africa, unemployment tends to be extremely high with almost 60% of the population having no jobs. This provides opportunities for oil operations to generate economic uplift for the locals. The people in the direct vicinity of where your project is could be your best assets or worst liability depending on the way you choose to interact with them.
A significant number of tasks in Oil operations can be completed by “unskilled labour”. This pool of the workforce can come from the local community. In some instances, several technicians, mechanics and operators may be present with little or no formal education, but run successful small enterprises in the community with knowledge of handling equipment like valves and pumps, these individuals are likely to have transferable skills that can be applied to Oil operations.
As a foreign investor- make all efforts to not come across as favouring one specific clan/ tribe- showing favouritism and segregating other clans in the region may result in discontentment and possible unrest.
Make every effort to encourage the creation of secondary industries from your presence there. For example, women selling food items to the workers on your site. Alternatively In some malaria-prone zones like East Africa- many women create mosquito nets, your presence there could be de facto market for their goods.
Another added value that a foreign investor can bring to the local community is formal training programmes, not only in Oil and Gas related courses, but opportunities arise in teaching English and general life skills. In Angola, BP has successful created university courses in Portuguese training Oil and Gas lawyers, Engineers and other professionals. This model not only educates a selection of the most promising individuals from the local community- but also makes them take more ownership of the projects taking place in their neighbourhood.
Drillers and Dealers :::
::: February 2011 Edition
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36