UNTIL FAIRLY RECENTLY, IOCs were all about offering “gifts” to appease African host companies.
Fortunately, that’s changing. IOCs are realizing that African communities are much more interested in corporate social responsibility (CSR) efforts that help them build better futures for themselves than they are in handouts with negligible or short-term benefits.
As a result, we’re seeing an uptick in community projects with the potential to bring meaningful improvements to everyday Africans’ lives. Examples include the specialized oil and gas industry training Aker Solutions of Norway is providing in Angola, the capacity-building and infrastructure programs multinational Tullow Oil operates in Ghana, and Chevron’s extensive investment in public schools in Nigeria’s Delta State.
Those are just a start. There are oil and gas companies putting real thought and effort into supporting local communities—perhaps they just need to do a better job in publicizing their activities.
The industry is also prioritizing higher transparency more than ever, having finally fallen into step with existing international regulations and initiatives to champion anti-corruption policies (see Chapter 9).
So, it’s not a question of if the collective partners of the oil and gas industry will play a significant role in helping African countries, economies, and people. In fact, they already do.
The real wait-and-see is what they will do to make the most positive impact.
Will this positive impact be in the form of the African governments creating an enabling environment for IOCs? Or indigenous oil and gas industry companies seeking business relationships and knowledge transfers from IOCs? Or independent and national oil companies following IOCs’ positive examples?
For the sake of Africa’s future, I hope it’s all three.
While companies can make significant changes through CSR projects, from capacity-building to environmental protection, they shouldn’t overlook the importance of supporting local business communities, whether that involves partnering and buying from indigenous SMEs or sharing knowledge and technology. All of these efforts go a long way toward bolstering sustainable economic activity and growth.
I’d like to see more concerted efforts to support indigenous businesses, especially from African companies who’ve already established themselves. Don’t get me wrong; we need foreign companies. But local companies—companies with a deep understanding of the culture, challenges, and dynamics within their communities—have tremendous power to make a positive impact.
It can be done.
Dovewell Oilfield Services is a strong example. After establishing a partnership with Peerless Pump Company in the American state of Indiana to manufacture and supply pumps in Nigeria, Dovewell made it a priority to find local engineers to help them install, engage, and maintain those pumps. They also established a valve maintenance company, which has allowed the company to employ and share technology with significant numbers of indigenous people and companies.
“Dovewell Oilfield Services Limited aims to be a force and a significant player across the entire value chain of the oil and gas industry in Nigeria specifically, and West Africa in general,” Tunde Ajala, the company’s executive director, said in early 2019.1
Of course, other indigenous companies—and business leaders—are strengthening the communities where they do business, too.
Take Atlas Petroleum International and Oranto Petroleum, founded by Prince Arthur Eze in 1991 and 1993, respectively. (Eze is usually referred to as Prince Arthur Eze because he is descended from tribal royalty.) The Abuja, Nigeria-based companies, which comprise Nigeria’s largest privately held, Africa-focused E&P group, operate in multiple countries throughout the continent.
Both companies have pursued aggressive exploration in frontier areas, capitalizing on the high rewards of frontier exploration. The diversity of the companies—with Oranto focusing on exploration and Atlas focusing on production—is a strategic investment strategy that Eze conceptualized and implemented.
His business model reverses the pattern of large exploration blocks going to multinationals, leaving local players with what’s left. Eze, who serves as executive chairman of Oranto Petroleum, has made it a priority to grab up valuable oil acreage and sell pieces of it to IOCs as the value increases.
Eze also is known for his commitment to philanthropy, from his $12 million donation to help fund the construction of an Anglican Church Youth Development Center in Otuoke, Nigeria, to his $6.3 million donation to Nigerian flood relief efforts several years ago.2
His businesses are making a positive difference, as well. After South Sudan’s Ministry of Petroleum awarded an exploration and production sharing agreement for Block B3 to Oranto Petroleum in 2017, the company began constructing two primary schools in central South Sudan.
“The construction of these two schools is a reflection of Oranto’s engagement to invest in social infrastructure in all areas where we operate in Africa,” Eze said. “Oil has to benefit all citizens, and education is key to development.”3
Oranto also is financing an education program, in conjunction with South Sudan’s Ministry of Petroleum, to train 25 teachers in the most underprivileged parts of the country.4
Then there is Sahara Group, a Nigerian energy and infrastructure conglomerate co-founded by Tope Shonubi and Tonye Cole that has demonstrated a commitment to empowering communities where it works. Through the Sahara Foundation, the company supports health, education and capacity building, environmental, and sustainable development initiatives.
A sampling of the company’s outreach efforts includes:
Food Africa, a collaborative initiative between Sahara Group, the United Nations Sustainable Development Goals Fund (SDG-F), Roca Brothers (SDG-F Goodwill ambassadors and Spanish chefs), and the Kaduna State Government to alleviate poverty by providing opportunities for indigent farmers to access loans and grants through established farmer cooperatives.5
The recent renovation of the University of Juba Computer Center in South Sudan.
The company’s new #LookToTheBook initiative, which strives to foster a reading culture among African youth. Sahara volunteers will host reading events in host communities and work to provide less-privileged children with easier access to books.
Sahara Group also has demonstrated a commitment to supporting the economies of its host communities. In addition to hiring local workers and partnering with local companies and suppliers, the company is developing infrastructure projects in oil and gas, utility concessions, industrial and business parks, real estate, hospitality, agriculture, health care, and specialty government-backed projects.6
Also making a difference for good is Shoreline Power Company Limited, a Nigeria-based power solution company that operates throughout sub-Saharan Africa under the leadership of CEO Kola Karim.
During the last 20 years, Karim has grown the business into an integrated energy company with upstream, midstream, and downstream operations. Karim, by the way, is a success story, too: The 2008 Young Global Leader Award winner serves on the Africa Advisory board of the London Stock Exchange and the Global Agenda Council on Emerging Multinationals of the World Economic Forum. He is a polo player and a patron of African art, and he co-manages Project HALO, which stands for Help and Aid for Less Opportuned and is the charity he and his wife, Funke, founded to help underprivileged children in Nigeria and the United Kingdom.7
Another African oil and gas leader making a positive difference is Nigerian-born Kase Lawal, chairman of Houston-based energy company, CAMAC (Cameroon-American), which operates in Africa and South America.8 At one time, CAMAC was the only energy company on the New Stock Exchange that was controlled by African Americans. Today, CAMAC is one of the largest Black-owned businesses in the U.S., generating more than $2 billion a year.9
From the time it was founded, CAMAC has supported scholarships, endowments, internships, arts education programming, and other educational programs in the U.S., Nigeria, and South Africa. The company’s charitable arm, the CAMAC Foundation, promotes health, education, and cultural arts initiatives in the communities where CAMAC operates.
We also can look to the example of Tradex, a subsidiary of Cameroon’s national oil and gas company, which specializes in the trading, storage, and distribution of petroleum products. In a prime example of African companies supporting one another, Tradex has been storing products at Luba Oil Terminal Equatorial Guinea (LOTEG) for the past several years.10 In December 2018, the company received authorization to distribute petroleum products and derivatives in Equatorial Guinea. Leaders in both countries praise this step as an opportunity for further economic growth and job creation.
From CSR initiatives to the creation of local job and business opportunities, these kinds of efforts are critically important. I believe that a key element in creating an enabling business environment is increasing the participation of Africans in the oil and gas sector. We need to open more doors in the industry to ensure that Africans are part of the complete value chain by creating business opportunities across all segments, oilfield services, upstream, midstream, and downstream.
As I’ve said many times before, regulations play a big role in establishing cooperation and information-sharing among all stakeholders. We need to have the right kind of policies, and that comes from the top. Africa’s leadership needs to demonstrate—through words and actions—that the “old way” of doing business is no longer appropriate.
And we can’t forget about the role individual companies should play in curtailing corruption. Aside from the obvious reason—that corruption is wrong—it is bad for business. It hampers economic growth, impedes worker productivity, discourages investment and financing, and reduces much-needed government investments in education and training. Companies need to have a strong compliance department that ensures they are consistently and honestly publishing what they pay. No question about it, this is critical information.
Sometimes it might not just be leadership that runs afoul. Remember this: The people represent the company—and their missteps can cost dearly. What I see is that most government employees in Africa are poorly paid. So, it’s no surprise that a public servant living hand to mouth will readily accept a bribe from the businessman who offers him four month’s pay to “help him out.” When his job isn’t paying him enough to afford a decent life, it’s hard for him to turn that down.
Offering a living wage should be the first line of defense against unethical behavior.
After that, writing employment contracts that include anti-bribery clauses helps ensure that all business relationships are conducted equally, fairly, and properly—as long as the same strong policies exist and are enforced in every region where the company operates.
Businesses can also fight dishonest conduct through internal policies and training. That kind of effort might include extensive corruption risk assessments and educating staff, subcontractors, consultants, and partners on how to handle requests for bribes, along with the establishment of clear-cut consequences for giving in to such requests.
Companies must establish their own anti-corruption manual that details their corporate policies and provides staff training. It is imperative that all personnel are well-trained in anti-corruption measures and that constant checks are in place to ensure compliance. This serves a two-fold purpose: It keeps all staff on the same page, and it shows authorities a dedication to curbing corruption. In the event of an investigation, an established (and well-taught) corporate policy is the best defense and carries much more weight than merely claiming, “We’re not doing anything wrong.”
The good news? We’re facing a global shift against corruption.
It helps that most organizations (not just the oil and gas sector) are joining anti-bribery groups and implementing the best practices, thereby helping to level the playing field. Individual companies are increasingly refusing to be part of it, creating a network of ethical role models for others to emulate.
I’ve seen a lot of companies that have refused to pay and have done business well. Sure, in the beginning, it’s hard. . . but the fortitude earns them the respect of both the local authorities and the other companies in their industry.
We also should be able to count on NOCs and national gas companies to support indigenous SMEs. In fact, I believe that should be one of their primary responsibilities.
Just think of all the aspects of running a large oil or gas operation. You need to have vehicles and office supplies and food services—and a whole range of other things. National companies can play a significant part in ensuring that legitimate local service providers are given preference. Rather than, for example, importing all of the food for sale in their employee cafeterias from Europe or America, it needs to become standard practice to work with local service providers to buy produce grown in the community. This simple step of buying into the local agricultural base empowers everybody, and everybody benefits from it.
But the potential of NOCs to benefit African countries doesn’t stop there. One Ernst & Young analyst described NOCs as “custodians of a nation’s resource development and energy security.”11 I like that. NOCs play a vital role in providing revenue for their countries—revenue that, ideally, is used strategically to provide much-needed infrastructure and to promote stability, sustainable employment opportunities, and diversification. To do that, NOCs need to be strategic themselves so they can adapt to market volatility, technological advances, and the challenges posed by competitors.
In Africa, NOCs can play a significant role in supporting a vibrant oil and gas economy—but the extent of the help varies from country to country. The impact of the NOC depends on its ability to mobilize resources, whether on its own or through strategic joint ventures with partners of its own choosing.
Unfortunately, having a strong central government has not helped us very much in this aspect. But isn’t strong government good for stability? Doesn’t a strong government enable strong business? Well, the sad reality is that this strength has actually held back development, especially in creating value and building infrastructure at the local level.
Sure, I understand that being government-owned can be a challenge.
For one, government sees NOCs as part of their major revenue stream into the country. That makes it difficult for these companies to retain their own cash resources to do some of the things that are needed to stay competitive and contribute to strong national economies. Another challenge NOCs face is keeping costs down. In the global economy, extremely sophisticated multinational supply chains can put NOCs at a disadvantage. The multinational players are able to call in financial and logistic resources that NOCs don’t have because they’re restricted to the national environment.
But successful NOCs find ways to overcome such restrictions.
Economic clustering, which brings together groups of companies with ties to a particular industry, is a strong strategy in many industries and in many parts of the world. National companies that work with their governments to encourage this clustering do a better job stimulating all aspects of the economy. Think, for example, of the tourism industry: A beautiful new upscale hotel won’t draw many guests if there aren’t appetizing restaurants with ready sources of food, easy transportation options with agents available to facilitate arrangements, shopping opportunities with sufficient staff, or even medical facilities to assist the unfortunate traveler. African oil and gas countries would benefit from the same type of approach.
Another avenue for enhancing profitability and competitiveness is partnering with IOCs, which helps NOCs gain specialized skills, expertise, technologies, and access to infrastructure—and share risks with their partners. The IOCs, meanwhile, get access to the NOC’s petroleum reserves.
Victor Eromosele, a former general manager of finance of Nigeria LNG and now chairman of the Centre for Petroleum Information, said in 2012 that NOC-IOC partnerships make sense where there is a common agenda and mutual respect.
“IOCs bring technology and finance to the table. NOCs have the hydrocarbon reserves . . . If history is anything to go by, the push-pull relationship between NOCs and IOCs will continue into the foreseeable future.”12
I’m hoping that the recently announced partnership between the National Oil Corporation of Kenya (NOCK) and global oil and gas services company Schlumberger will be a strong example of the kind of cooperation and respect that Eromosele described. NOCK engaged Schlumberger in April 2018 to support national capacity building in field development planning and production optimization.
Even more exciting is that the companies’ agreement includes a comprehensive skills transfer exercise—a project-based learning opportunity—for 25 young staff members from NOCK and Kenya’s Ministry of Petroleum and Mining. In addition to classroom and field-based learning, the project includes one-on-one mentoring with National Oil staff members and Schlumberger subject matter experts.
Another promising new NOC-IOC partnership, an agreement between Angola’s state-owned Sonangol and French multinational Total, will focus on fuel distribution and lubricant sales in Angola. If that goes well, Total says, it would like to expand the partnership to petroleum product logistics and supply, including imports and primary storage of refined products. Of course, this is hardly the first agreement between Sonangol and Total; instead, it’s the result of a long, successful history of partnerships on upstream activities.13 Hopefully, the end result of this new deal will be sustainable job and business opportunities for Angolans.
African NOCs also can look to other parts of the world where state-owned oil and gas companies have matured quite successfully into viable competitors on the global energy market. With their growing strength, those companies have started boosting their domestic markets by hiring more home-grown operators, contracting with more local suppliers, and nurturing entrepreneurship. Not only that, but they’ve also begun influencing efforts abroad.
In this regard, we see impressive action out of Brazil, Malaysia, and Norway. The NOCs in these three nations have raised the bar.
Petrobras, Brazil’s largest company, is one of the largest energy companies in the world. It has developed breakthrough technologies for exploration, development, and production in ultra-deepwater pre-salt oil fields that operators from other countries are trying desperately to emulate.
Despite declining production, the Norwegian NOC Statoil has risen to a globally competitive level thanks to its partnerships with universities and research institutes. In fact, companies that partnered more heavily with Norwegian researchers in Norwegian institutions received preferential access to new concession blocks and increased investments from Statoil to improve their R&D capabilities.
Malaysia’s PETRONAS has expanded well past its original intent of managing and regulating the domestic upstream oil sector. Instead, it learned from partnering with ExxonMobil and Shell how to expand its capabilities beyond its borders and now operates in more than 30 countries.
There’s no reason why African NOCs can’t follow their examples.
Equatorial Guinea’s Minister of Mines and Hydrocarbons, Gabriel Mbaga Obiang Lima, recently agreed to participate in a short interview with me about NOCs.
Lima said he hopes NOCs in Africa will not follow the path of those in Asia and Middle Eastern nations that have become more like national energy companies (NECs).
“NECs are a mistake because NOCs’ role is oil and gas, not wind or solar or other energy sources,” he said. “African NOCs have missed that part that they should concentrate on. My view is that they were supposed to be the ones bringing a solution regarding the management of our resources, and they haven’t done it. Their ministries have had to go to IOCs themselves and negotiate new deals and try to keep things moving. The problem has been that those NOCs ended up working more like ministries and civil servants with secure jobs. Whatever happens, they will not be blamed, and they will still receive their paychecks. Meanwhile, ministers are being blamed for everything that has happened. Ministries are not responsible for trading or getting into assets, but have been wasting their resources on this regardless because NOCs were not fulfilling their operational responsibilities.”
Lima also commented on the secrets to his country’s success—and the importance of African countries supporting one another.
“Equatorial Guinea has been talking to all African producers, listening to ideas of Nigeria and Ghana on structuring industry and doing local content, and then implementing them back home. We are not strict on planning, because industry changes every year. Industry is transforming quick and fast. African nations (and NOCs) need to learn to talk to each other and share lessons, and then implement them.”