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Frederick F. Ntido
Introduction
Since 1956 when oil was first discovered in commercial quantities in Oloibiri in the present Bayelsa state, the relationship between the multinational oil companies and the host communities where they operate has been far from cordial. There has been a gradual deterioration from uneasy tolerance to the present spate of youth militancy and clamour for resource control largely premised on the abject poverty in the host communities and the widespread degradation of the environment. There has equally been a large amount of buck passing and horse-trading between the Federal and State Government over responsibility for the present state of affairs.
However, the host communities caught in the throes of biting economic deprivation and rampaging ecological degradation are resorting to unmitigated violence and intimidation to press home their demands for rapid development of their communities, and economic empowerment. The Federal Government insists that the revenue allocation of 13% of oil revenue to the oil producing states is adequate to implement community development projects in the affected areas. The oil producing states far from being content with any patronizing derivation formula are insisting on total resource control.
The Federal Government recently, in 2000, set up the Niger Delta Development Commission charged primarily with the responsibility of using the sums received from the allocation of the Federation account for tackling ecological problems arising from the exploration of Oil Minerals in the Niger Delta area. Interestingly, Section 14(2)(b) of the NDDC Act provides amongst other things that 3 per cent of the total annual budget of any oil producing company operating on shore and off shore, in the Niger Delta area, including gas-processing companies shall be paid and credited to the fund.
In addition to the enormous funds available to the Commission, the oil companies maintain that special budgetary allocations are made internally for community development projects in the oil producing areas in the Niger Delta. Recently, the Niger Delta Development Commission announced that it would be undertaking 641projects estimated to cost over N35 billion in the oil producing communities.
The pertinent question to ask at this juncture is: if the above laudable statistics are anything to go by why is the Niger Delta area witnessing increasing restiveness and community agitations? Are the multi national oil companies apart from earmarking budgetary allocations for community development armed with an effective dispute resolution mechanism? What are the ways to ensure prompt and effective resolution of disputes that threatens to stall the operations of the oil companies and how best disputes are forestalled.
This article will endeavor to examine the dynamics of the relationship between the multi national oil companies and their host communities, and also proffer ways for resolving disputes that might arise in the course of the oil companies operations. To avoid a simplistic approach to this issue the article will involve a comparative analysis of methods used in other oil producing countries of the world, and through this fashion out an indigenous solution to the perennial problem bedeviling the oil companies in the Niger Delta area.
The History of Oil Development in the Niger-Delta
The first discovery of commercial quantities of oil in Nigeria was in 1956 at Oloibiri, about ninety kilometers west of Port Harcourt in what is now Bayelsa State; other discoveries soon followed and exports began in 1958, although significant quantities only began to flow from 1965, with the completion of the terminal on Bonny Island, on the Atlantic coast. Following a drop in production due to the civil war of 1967 to 1970, output rose rapidly from 1970, and by 1974 oil revenues constituted over 80 percent of total federal revenues and over 90 percent of export earnings, figures which have remained similar since then.
In 1980, when oil export revenues peaked at U.S.$24.9 billion, external indebtedness had reached U.S.$9 billion, oil accounted for 27 percent of Gross Domestic Product (GDP), about 80 percent of government revenues and expenditure, and 96 percent of total exports receipts. Today, the petroleum sector comprises more than 340 percent of the GDP, continuing to provide more than 95 percent of exports.
Estimates of Nigeria's oil reserves range from 16 billion to 22 billion barrels. Most of this oil is found in small fields in the coastal areas of the Niger Delta (according to the Ministry of Petroleum Resources, there are 159 oil fields, producing from 1,481 wells.
The Niger Delta, the main oil and gas producing areas of Nigeria has been described as one of the world's largest wetlands, and certainly the largest in Africa. " It covers an area of about 70,000 Square Kilometers and consists of distinct ecological zones which are made up of a large river delta in a tropical region, coastal ridge barriers, mangrove, fresh water swamp forest.
The Niger Delta Communities are to be found in Rivers, Bayelsa, Delta and Akwa Ibom States. Oil is also produced in Cross River, Abia, Imo, Edo and Ondo States. Today, oil is responsible for about 80% of Nigeria's total revenue and 95% of export earnings. It is therefore noteworthy that oil has been vital in financing the Country's economic growth and development in the last 25 years. Oil also fuels state power and activity in Nigeria.
The Structure of Oil Company Agreement with the Nigerian Government
It is worthwhile to consider the relationship between the multi-national oil companies and the Federal Government, as this is essential for a thorough understanding of the perennial problems bedeviling the Niger Delta area.
Section 44(3) of the Nigerian Constitution 1999 vests in the Government of the Federation, the entire property and control of all minerals, mineral oils and natural gas in, under or upon any lands in Nigeria, its territorial waters and Exclusive Economic Zones. Its management shall be as prescribed by the National Assembly.
Nigeria did not have sufficient indigenous expertise at the time oil was discovered to develop the oil reserves itself, and in all likelihood still does not. In this context, the federal government negotiates the terms of oil production with the international oil companies, and takes a proportion of the revenue generated. Since independence in 1960, and in concert with the resolutions of the Organization of Petroleum Exporting Countries (OPEC), the government has steadily increased both its control over and the degree of competition within Nigerian oil production.
From 1914, the date of the Colonial Mineral Ordinance, the first oil related legislation in the new colonial state of Nigeria, the grant of licenses for oil production was restricted to British companies and individuals. In 1937, the Shell D'Arcy Company, jointly owned by Shell and by British Petroleum (B.P.), was given exclusive exploration and production rights to the whole of Nigeria. This monopoly was maintained until 1955, when the concession area reduced and Mobil entered the field for the first time.
In 1960 Nigeria gained independence from Britain; by 1962, Shell's concession areas had been further reduced, to the most promising areas, and other companies also began exploration. By the mid-1960s, Gulf Oil (now Chevron), Elf, and Agip were all involved in production. In 1959, still under colonial rule, the Petroleum Profits Tax Ordinance introduced a fifty-fifty profit share between the oil companies and the government; in 1967, the government imposed OPEC terms on the companies operating in Nigeria, ensuring that much greater royalties were paid. The 1968 Companies Decree forced all companies operating in Nigeria to become Nigerian corporations; the 1969 Petroleum Decree further increased state control of the industry, and remains the basis for the regulatory system in operation today. The 1970s saw partial nationalization of the industry, as the Nigerian government took an equity stake in the oil industry, raising its participation in most companies from 35 percent in 1971, to 55 percent in 1974, and 60 percent in 1979.
The main onshore exploration and production activities undertaken today by foreign oil companies in Nigeria are in joint ventures with the Nigerian National Petroleum Corporation (NNPC), the state oil company. The distribution of shares in joint venture determines the division of investment in all capital projects carried out by the operating company, including exploration, drilling, construction, or environmental improvements; the participating shareholders also jointly own the reserves still in the ground. The multi-national companies operate these joint ventures, and take all day-to-day decisions in their management.
The following companies operate the six joint ventures involving foreign owned companies:
- Shell Petroleum Development Company of Nigeria Limited (SPDC): A joint venture operated by Shell accounts for more than forty percent of Nigeria's total oil production from more than eighty oil fields. The joint venture is composed of NNPC (55 percent), Shell (30 percent), Elf (10 percent) and Agip (5 percent) and operates largely on dry land in the mangrove swamps.
- Chevron Nigeria Limited (now Chevron/Texaco): A joint venture between the NNPC (60 percent) and Chevron (40 percent) has in the past been the second largest producer with fields located in the Warri region west of the Niger river and offshore in shallow water.
- Mobil Producing Nigeria Unlimited (MPNU): A joint venture between NNPC (60 percent) and Mobil (40 percent) operates in shallow water off Akwa Ibom state in the southeastern delta.
- Nigeria Agip Oil Company (NAOC): A joint venture operated by Agip and owned by NNPC (60 percent), Agip (20 percent) and Phillips Petroleum (20 percent) produces mostly from small onshore fields.
- Elf Petroleum Nigeria Limited (EPNL): A joint venture between NNPC (60 percent) and Elf (40 percent) produce both onshore and offshore.
Texaco Overseas Petroleum Company Unlimited (TOPCON): A joint venture operated by Texaco and owned by NNPC (60 percent), Texaco (20 percent) and Chevron (20 percent). With the merger of Chevron and Texaco this join venture has been slightly altered.
The Root of Conflict in the Niger-Delta :Oil Production and the Degradation of Oil Producing States
The foregoing extensive analysis of the structure of oil company agreement with the Federal government and the history of the development of oil in the Niger Delta underscores the intensive and far reaching effects of the operations of the multi-national oil companies in the host communities. Oil production activities are the foremost sources and causes of pollution in the oil producing communities. The catastrophic effects of pollution on the environment are well known to the industry and all those concerned with it and affected by it.
The major causes of pollution arising from oil production operations are oil spills and these could themselves arise from several causes including (1) blow outs (2) equipment failure (3) operator/maintenance failure (4) sabotage (5) sand cut (erosion) and of course (6) accidents.
Apart from the causes mentioned above, which is associated with the oil industry, the normal operations of the machines and engines used in the production, refining and transportation/transmission of oil, pollute the environment. Thus, the air, surface water and land are adversely affected by toxic and other hazardous wastes. The victim usually at the receiving end of such environmental pollution is the oil producing community, which are not merely deprived of their means of livelihood but are confronted with the danger of hunger and starvation. As it was in the case of the recent Mobil oil spillage, whole village could be overwhelmed with oil pools, rendering the people homeless and displaced. Periodic overflow of crude oil in the Niger Delta of oil operations result in the destruction of thousands of hectares of mangrove swamps, pollution of rivers and streams and the elimination of marine creatures like fishes, crabs, mudskippers, oysters etc.
Gas flaring on the other hand, apart from the huge economic loss this represents to the nation, the cost in the degradation of the environment and to the health of the people of the oil communities is incalculable. Unburnt carbon is transported into homes and working areas, the vegetation is destroyed, soil rendered completely infertile and the tremendous heat creates unceasing hardship and discomfort.
In the quest for development, activities in the oil industry have greatly impaired the ecosystem by undermining its viability. Oil exploration, refining and storage have carried with them a lot of environmental problems especially in the Niger Delta region. Oil spillage, for instance causes the destruction of aquatic life, eutrophication of water bodies, de-vegetation and other forms of ecological damage. Gas flaring, gas emissions and fumes is hazardous to human and animal health.
Conflict between Oil Companies and Host Communities : The Causes
It is essential to have an understanding of the underlying causes of conflict in the Niger Delta in order to be better positioned to proffer practicable solutions. It must be said at the outset that the causes are primarily multi-faceted and intertwined. Some of these causes have already been briefly referred to above and the rest shall be considered cursorily. It suffices to say at the moment that the unrest in the Niger Delta is the culmination of a multiplicity of factors that are largely human induced.
- Pollution
This has been a major cause of the conflicts in the Niger Delta. Oil spillages on farmlands and surface rivers and mangrove and degradation arising from gas flaring, which have been refereed to earlier. There is also the problem arising from the settlement of unburnt carbon particles on the environment and people and structures.
- Long years of Neglect.
This has been an ongoing problem in the Niger Delta. Firstly, there is no legislation with genuine consideration for the environment. Secondly, there is very poor ethical consideration and or practice in the industry. In this regard there is ineffective monitoring and control of practices in the production activities. There is also lack of monitoring equipment and personnel by monitoring bodies such as the DPR and there is equally the refusal to rehabilitate exploited land.
- Oppressive Legal Regime of Oil Production in Nigeria
The following major pieces of legislation, enacted during the period of 1969-1999 show how oppressive the laws made under the leadership of the majority ethnic nationalities in Nigeria deprived and marginalized the minorities and ensured no real and sustainable development of the Niger Delta and other oil producing States where the resources of Nigeria come from.
A few of these oppressive legislations include:
- The Petroleum Decree (No. 51) of 1969, which expropriated all petroleum resources from the oil producing States and placed them under the control of the Federal Government.
- The Off- Shore Oil Revenue Decree (No.9) 1971 through which all the minerals in the continental shelves were expropriated by the Federal Government.
- The Land Use Act, 1978-transferred ownership of land from the Communities to the State Governors, without compensation.
- Oil Pipeline Act, 1965; Petroleum Drilling and Production Regulation, 1969 and Petroleum Decree 1969. These pieces of legislation are commendable in themselves but are not effective in protecting the communities when issues of compensation for oil spillage pits them against the immensely powerful multinational oil companies.
The Dynamics of the Conflict between the Host Communities and the Oil Companies
We have attempted above to highlight the major causes of the conflicts presently engulfing the Niger Delta between the host communities and the oil companies. However, beyond the legislations and the degradation of the environment the communities and oil companies are embroiled in relentless hostilities based on mutual misunderstandings. The reasons for these are not farfetched.
The oil companies have consistently maintained that having fulfilled all their financial obligations to the federal government with whom they are doing business there is no continuing obligation on their part to the communities. On its part the host communities insist that the oil communities must plough something back to the areas where they are making immense wealth from, if not by obligation then in the spirit of good neighborliness.
The payment of compensation has also been a major source of conflict. The oil companies have held the belief persistently that what they pay as compensation is adequate. The communities on the other hand have maintained that the compensation is anything but adequate.
There has been constant misunderstanding over the justification of claims for damage occasioned by oil spillage and degradation to the environment. The oil companies view some of these claims as spurious and unfounded. The communities however maintain that their claims are genuine and justifiable.
Another major source of conflict is determining the bona fide representatives of the communities with whom the oil companies should deal. The oil companies are of the opinion that there is a great difficulty identifying the actual representatives of the communities. This impediment has resulted more often in double compensation being paid to communities and in frequent delays in approving payments until the determination of the legitimate representatives. The communities have however argued that the oil companies are deliberately stalling the payment of compensation in order to frustrate them.
Proposals for Conflict Resolution in the Niger - Delta
The methods so far adopted by the oil companies operating in Nigeria for conflict resolution have been far from effective. One probable reason for this is the fact that it has been largely tailored to achieve a judicial result. This, however, has proved quite unsustainable in the face of the abject poverty and extensive degradation of the communities of the Niger Delta. No judgment, however sublime and impeccable its reasoning, can rein in the primitive forces of violence that is occasionally stirred within the communities over the parlous state of their economy.
It then follows that the most effective approach to eradicating the perennial conflicts in the Niger Delta should be a community-based approach. This method has as its major premise the assumption that the communities will always be there. And so long as the oil is drilled from the areas, there must be visible and manifest evidence of progress and wealth in the communities. The oil companies must realize that the safety and security of their multi-billion dollars investments in the Niger Delta depends more on the goodwill of the communities than on the firm assurances of the Federal Government. The case of Aceh in Indonesia where Exxon Mobil's facilities are increasingly the target of separatist action is a pertinent example.
Company Sponsored Community Development
Effective community development programs can help ensure an attractive business climate that fosters smooth operation, can create a competitive advantage when dealing with host countries, and can help meet corporate goals of good citizenship.
Community development programs represent one means helping ensure a productive business environment. Unrest within a community can strike a blow to energy companies. For example, the Oil ands Gas Journal reports that in the Niger Delta, operations were virtually brought to halt for three years by community unrest. More than 325 attacks on Shell's units occurred in 1998. Elf Petroleum Nigeria Ltd. lost more than 100,000 barrels of production per day for several weeks due to escalating violence and unrest.
Cultivation of support through community development may also create a competitive advantage for oil and gas companies. For example, the New York Times reports that when Amoco started drilling for oil in Angola a few years ago, Exxon and Chevron had already landed some of the richest oil fields and could easily outbid their smaller rival for others. Lately, though Amoco has been the successful bidder on several oil tracts. Why? The company, which is now BP Amoco, realized that the Angolan government torn by the civil war was ready to favor any company that was also willing to assist with social projects.
Proactive Involvement in Host Communities
The oil companies must begin a direct involvement in the affairs of the host communities. This is not a call for interference in the internal affairs of the communities but rather a close monitoring of events and developments with a view to identifying and forestalling potential conflicts. It is far easier and less expensive to avert a crisis than to solve one. The oil companies must constantly play the role of the impartial arbiter. There must not be any overt taking of sides in any dispute, as this will definitely escalate the situation. At all times the primary objective in conflict situations should be to bring the opposing parties to reach a compromise. This is predicated on the ground that an agreement reached with one party cannot guarantee a wider peace. And an agreement reflecting a compromise is much more easier to maintain and enforce.
In addition to the foregoing the fact that the NDDC Decree has made it mandatory for all oil and gas companies operating in the Niger Delta to contribute 3 per cent of their annual budget to the NDDC should make the oil companies conscious of their role as stakeholders in the region. There must be a renewed interest in the development of the area.
Conclusion
The factors affecting the relationship between the oil companies and the host communities are unarguably very intricate. This intricacy is however the product of forces outside the control of both key actors. As pointed out earlier 90 % of the legislations regulating the oil industry are one-sided and oppressive. The federal government ensured its position was quite comfortable while the host communities were left to slug it out the oil companies. So long as the legislations and the implementing of same is not entirely in the interest of the host communities of the Niger Delta the agitations against the oil companies would most likely continue.
The most attractive option left to the oil companies then is to endeavor to enthrone peace and harmony in the communities where they are operating. This will call for closer ties with the communities and a readiness to plough back some of the wealth derived from the areas. |
