With the world’s conventional oil reserves reaching their peak production, oil companies looking for new opportunities are tapping into Africa’s growing oil industry. Africa is home to 10 per cent of the world’s proven oil reserves, but no one knows for sure how much of the fossil fuel is really hiding below its ground.
In 2001, seven of the eight billion barrels of oil reserves discovered in the world were found in Africa, but drilling in Africa’s socially and politically charged regions comes with high risks. Take, for instance, companies such as Shell operating in Nigeria and Talisman (formerly) in Sudan. Because of their inexperience with local cultures, these companies were dragged into the middle of tribal conflicts with dire results to their corporate image.
Regardless, oil companies from around the world are willing to take those risks for a chunk of Africa’s black gold. Nigeria — the world’s seventh largest oil producer — has international oil companies including Shell, Total, Statoil, Chevron, ExxonMobil and Agip pumping more than two million barrels of oil a day for export. Up to 65 per cent of related profits go to the Nigerian government.
Nigeria’s petroleum industry accounts for 76 per cent of the government’s revenue, totalling $350 billion in oil revenues since 1965. Yet, because of human rights violations and widespread corruption, Nigeria ranks 159 out of 177 on the UN’s Human Development Index, with 60 per cent of the people living on less than $1 US a day.
“The people know that most of the revenue for the country is coming from oil, but the portion that they are getting is so small,” says Nigerian born Dr. Femi Ade, a civil engineer working in Calgary. “That’s why the locals (of the Niger Delta) are putting so much pressure on the government, they want a fair share of those profits.”
To clearly voice their discontent, tribes of the oil-rich delta regularly make it difficult for oil companies to operate by compromising equipment, stealing oil and kidnapping anyone with oil industry connections.
“My brother has a business in the delta,” says Lara Ade, who grew up in Nigeria and settled in Calgary with her husband Femi in 1996. “He was kidnapped a few years ago, because he provides satellite communications to oil companies,” she says. “He gave what money he could and said the right words, and fortunately, they let him go.”
To avoid these sorts of complications, Nexen (a Calgary-based oil and gas company) is sticking to Africa’s offshore opportunities. “It has fewer issues with community interactions and it lessens any potential interference with people’s daily lives,” says Gerry Moffatt, division manager of Block 222 Development. That being said, Nexen knows that oil spills and boat traffic may negatively affect nearby shore communities, and that’s why the company is engaged in supporting sustainable initiatives in the delta.
But working directly with African communities has proven to be very challenging. “It’s really tough to get money to where it’s needed,” says Moffatt. “When funds are paid to community leaders, they decide where the money goes and they haven’t been held accountable for how those funds are used,” he says. As a result, very little of that funding ever reaches community members living in severe poverty.
When non-governmental organization (NGO) Pro-Natura International (Nigeria) asked Nexen to support a pilot community development initiative in 2000, the company jumped on the opportunity. “Pro-Natura acts as a middle-person between operating oil companies and communities,” says Garry Mann, Nexen’s general manager of health, safety and environment. “They help delta communities appraise their needs and then they make sure that the money we donate is used for their designated purposes.”
Nexen and Pro-Natura partnered again in 2004 to develop the Oro Community Development Trust. Nexen funded a 30-passenger water ferry that takes people across the delta’s Cross River. “The ferry is a successful commercial venture,” says Mann. Ferry revenues and seed funding from the Trust are now supporting other initiatives, such as educational and agricultural programs.
Nexen is currently partnered with Total, Chevron and ExxonMobil on Nigeria’s offshore Oil Prospecting License 222. As the operator of the contract, Total deals with local communities. “And as a project partner, we support the operator by sharing Nexen’s experiences on developing effective community programs,” says Richard Jensen, Nexen’s vice-president of international exploration and production.
Despite the wealth beneath their feet, tribes of the Niger Delta are struggling to survive, fighting one another and oil companies to gain benefits from their oil. Perhaps socially responsible oil companies along with Nigeria’s new government will eventually create better living conditions. Nigeria recently paid off its multi-billion national debt, and has made a pledge to end corruption and to fully reform the Nigerian National Petroleum Corporation, which controls the country’s oil and gas industry.
This is the second of a five-part series on Africa. Next week: malaria.
