Nigeria began producing oil six decades ago and is now one of the world’s largest oil producers. But up until recently, indigenous participation in the oil industry, particularly the upstream sector has been minimal. Previously dominated by international oil companies (IOCs) whose financial reach and technical expertise gave them a distinct advantage, the oil industry has finally started to see much needed change
Efforts to indigenize the oil industry have spanned two decades and have previously been slow and unsuccessful. The Local Content Act which emerged in 2010 has had the greatest impact on the sector, finally resulting in an increase in indigenous oil and gas companies who now have the financial resources and technical competence to own and operate assets in Nigeria across all activity areas in the industry and are therefore now able to make a sustainable contribution to the Nigerian economy.
This contribution is much more tangible and real coming from a homegrown company compared to an international one. Recent Nigerian history is rife with stories of infamous disagreements between IOCs and the communities where they operate as residents decried what they perceived as exploitative treatment from the companies. So far, indigenous companies have not had those problems which have perennially bedeviled the IOCs. This is perhaps because as more Nigerian companies begin operations and discover oil in marginal fields, it is clearer than ever that their organizational success is tied to the optimal balance of the communities in which they operate. It is also likely because corporate social responsibility (CSR) activities are more tailored to solve Nigerian problems which are best understood and most felt by Nigerian-owned companies.
Nigeria needs more socially-inclined companies that grasp the magnitude and complexity of indigenous problems, and are willing to empower those who can best solve them to do so. Strategies such as Petralon’s clearly express faith in Nigerians to successfully handle responsibility for their development and to drive targeted projects in crucial areas such as employment, healthcare, and education.
An indigenous upstream energy company with a pan-African reach, Petralon Energy acquires, develops, finances, and operates assets in the oil and gas sector. The company has set out to redefine the relationship between oil companies and the community by pledging 5% of net profits from all present and future assets to the communities in which it operates. This is based on the understanding that the members of its host communities are best placed to determine the areas that will benefit from additional resources with Petralon empowering its host communities to decide which projects to deploy funds to, and who the funds should be allocated to.
Similarly, indigenous Nigerian integrated gas company Seven Energy, engages with the community investing in their development directly, cutting out third parties which ensures that money meant for the community is received by the community.
In turn, it is critical that the incoming administration empowers indigenous energy companies by providing guarantees for increased security and fair regulation/legislation. In addition, the Department of Public Resources should be encouraged to empower indigenous companies by allocating more oil assets to qualifying companies, and doing so in a transparent manner and at a faster pace.
The expansion of indigenous companies into more Nigerian communities can only lead to higher impact social responsibility with more tangible benefits felt by the host communities. Only when indigenous oil companies begin to take the lead in the sphere of social responsibility can there truly be development and societal balance in resource-rich host communities in Nigeria.