How We Relate With Host Communities
By Sebastine Obasi
Monday, September 22, 2008
The oil industry in Nigeria has long been dominated by the multi nationals. In recent times, however, indigenous companies have taken the bull by the horn, with their entry into the capital-intensive venture. One of such indigenous companies is Emerald Energy Services Limited. Unlike the multinational oil companies, Emerald Energy Services Limited is at home with its host communities. In this interview, Jude Amaefule, a petroleum engineer and chief executive officer of the company, tells Sebastine Obasi, senior staff writer, the strategies employed by Emerald to maintain a harmonious relationship with the host communities and the challenges facing indigenous oil companies in Nigeria. Excerpts:
Newswatch: Emerald Energy Services Limited and Amni International won the oil block OPL 229 some years ago. How far have the companies gone to develop the block?
Amaefule:Thank you very much. As you rightly said, Emerald and Amni International won the block, in the first open competitive bidding the country ever held.
We won it in 2001. And we were awarded 55 percent while 45 percent was awarded to AMNI International. Emerald was designated the operator of the block. Since that position of the block as you very well know, we have fulfilled the government signature bonus. We commenced operation early 2002. From then to date, we have done a lot of work on the block. The block has been converted to an oil mining lease. We have drilled wells as required. Now we are planning on further development of the opportunities we have encountered on the block. The block is located within the Brass area. We are lucky, I would say we are surrounded all around by Shell fields, all through the area. We have acquired modern 3D seismic drilled and analysed the wells. We have conducted a lot of studies on the block. We have spent well in excess of $150 million so far on the block.
Newswatch: The oil and gas business is quite capital intensive, how were you able to source for fund?
Amaefule: We were lucky. We had spent a lot of our own money with our original partner prior to 2005. In 2005, the government permitted us to farm out about 40 percent of the interest to some foreign companies. We farmed two percent to a Dutch company and 38 percent to a Chinese company. We are funded delightfully by Nigerian banks. Diamond Bank has been the chair leader in the funding. We make a joke that Emerald and Diamond are two jewels. Our relationship has been wonderful. We are making progress, planning to drill additional wells, appraise them to see whether we can get a little bit of return on investment.
Newswatch: Emerald seems to have a harmonious relationship with the host communities. No staff of the company has been kidnapped. What strategies has the company employed to maintain a good rapport with the host communities?
Amaefule: We did our homework well. We realised that the Niger Delta people are neglected. When you get in there, you cry for them. The area has not seen any development. We looked at our activity like we do when we are going to marry from a family. In conflict resolution principles, you look at an area where there could be conflict. When you go in there, you go with a plan that mitigates the impact of the conflict. So when we first came in, we went and knocked at the doors of the location, where we are going to operate, and told them we are here. What do you think, we can do to marry your daughter. And from day one, we went in there with mutually assured respect, responsibility and trust. We hired their children. To acquire that site we needed about 1500 people. The company that acquires the seismic is BGP, a Chinese company. It is one of the best in the world. It had a few Chinese and the rest are the people from the locality. We had to cut through the bushes and lay the lines for the receivers at the source. All the line cuttings were done by the locals. We also drilled shallow wells. All of those things were done by the locals. So, they had empowerment. Other people talk of community development. We call ours community empowerment. You have to empower the people to take care of themselves. We went there with respect. We treated them with respect. Today, we are in the best of shape with them. So because of this, we did not suffer the challenges others did. When we were doing the campaign, we were bringing clean water in barges to give to the people to drink. This is because the people didn’t have clean water to drink. Clean water is a scarce commodity in the costal areas of the Niger Delta. We went in there and treated them well. Due to the strategy we used, we were able to acquire excellent quality 3D seismic in the North-West corner of our block which is a swamp, in a record time of 68 days. There was no lost time index, and no accident. No company has achieved that in this country. And this we were doing when the challenges in the Niger Delta were happening. We had a different approach to solving it. That is why we were able to succeed. We also did something that is unique. After acquiring the seismic, which was done through the mangrove, we went back, hired the people to replant the mangrove. So we maintain the environment in a pristine condition as we saw it. We are environmentally sensitive. We are community conscious and we treat the people with respect. The thing we did when we won the block, we agreed that we were going to make the host communities part of our stakeholders. We agreed that we were going to give a certain percentage of our net revenue to the communities.
Newswatch: What is the percentage?
Amaefule: About three percent of our net revenue is reserved for the stakeholders. Despite the fact that we have not produced oil, we have spent a lot of money on community empowerment. When we made our presentation to the DPR recently, we were patted on the back for the effort we have made. Many companies have also been coming to us, to ask how we were able to achieve all these. It takes a different type of strategy. Nobody kidnaps his in-law. Most importantly, our community empowerment manager is from one of the host communities. He is a stakeholder in Emerald. Almost 95 percent of the staff have shares in Emerald. When we are passing through an area where fishing nets are, some of them do cut and we pay for them. Because, it could have been me living in that area. I assure you when we start production, we will be closer to the people. The model we bring to those areas will be unique. That’s the expectation we promised ourselves.
Newswatch: Where exactly is the project located?
Amaefule: Half of it is in Bayelsa, Brass area of Bayelsa. The North-West corner is Bayelsa. The South-East corner is Rivers and we are surrounded by Shell.
Newswatch: What production capacity in terms of barrels per day are we expecting Emerald to add to Nigeria’s oil production?
Amaefule: The prospects we have, when put them on, all I can give you is estimate, we should be able to add 20,000 barrels per day initially. But we grow with time because we are not going to be looking at just one field. We are going to be looking at multiple fields. But if you look at near term, intermediate term and long term, near term being the next two years, we should be expecting 20,000 to 30,000 barrels per day.
Newswatch: What is the ownership structure of Emerald like?
Amaefule: For all intents and purposes, Emerald is a Nigerian company with 100 percent Nigerian content. The thing that we have which is a little bit unique is that, apart from many years of oil industry practical experience, we are also technology purveyors. I have three patents to my name. I have published over 55 technical papers. And two years ago, I was given the Society of Petroleum Engineers International Technology Award for the African region. That was in 2006. Few days ago, I was notified that I would be given the Society of Petroleum Engineers International distinguished membership in September, in Denver, USA. That is the highest rank one can attain in the business technically. My former chairman, is also an accomplished oil and gas erudite scholar. When we came in to set up the company, our technology was built from the scratch. We have the technical capacity to operate as a company. Before we started working for our company, we have consulted the big oil companies. What is unique about us is that we have a large technician base. We employ the best practices in the oil industry. We have global networks. I have worked in Argentina, Australia, Indonesia, Malaysia e.t.c.
Newswatch: Is Emerald focused on oil alone?
Amaefule: I was in Anambra State the other day to announce one of the big gas projects we are going to build in Nigeria. That project, God willing, when it comes on stream, will add a lot to guarantee Nigeria’s food security. Making money is important, but one of the reasons we came home is to see how we can empower our people. That project is called INGUP, that is, Integrated Natural Gas Utilisation Project. It was selected to be sited in Anambra State. It is a subsidiary of Emerald. That plant will produce ammonia, urea fertiliser, so that we can have food security. We are also going to produce petrol-chemical ingredients that can be used to produce chemicals. It is a five-year project. You may wonder why Anambra. Anambra has the largest number of entrepreneurs. Secondly, the largest gas resources are in Anambra. Thirdly, Anambra is centrally located, it becomes an economic nerve centre so to speak. Our nerve vision is to grow the Nigerian economy through agriculture and chemicals. Nigeria imports almost all the chemicals used in the country. This plant will also produce chemical for the pharmaceutical industries. That is one other project Emerald is embarking on. We did feasibility on it a few years ago. What Emerald wants to do is to be involved in the entire hydro carbon value chain from exploration and production to mid stream and to down stream and then agriculture. For all intents and purposes, until our people can feed themselves, this country cannot grow as we expect it.
Newswatch: When you visited Imo State recently, you said that Emerald is going to build a technological park. Is it different from the Anambra project?
Amaefule: The technology park is different. In Imo, because of its location between Rivers State and the two airports, in those states, we need to build a technology park. That park is going to be a place where companies like ourselves and others who operate in the business would locate. It will have all the essential ingredients for attracting technologies to the area. It is modelled after the technology park in Australia. The essence is to bring in resources, technological purveyors etc. Graduates from higher institutions can go in there to create things. The technology park would have power, water, swimming pool, golf course, specially built houses. We will go to universities to bring some professors, put them in the technology park. It is in line with what the government is talking about - clean and green, but it is going to be environmentally-friendly all powered by solar. Some companies will assemble their equipment at the park.
Newswatch: Nigerian refineries have not been producing at full capacity. And the federal government has announced its willingness to give licence for private refineries. Do you intend to build a refinery?
Amaefule: The current cost of refining petroleum products in Nigeria makes it difficult to make money from refineries, I have to tell you that. You can not compete with people going to import fuel and making lots of profit. Refineries are capital intensive. I would not say no or never, but right now our focus will be on gas utilisation.
Newswatch: For how long have you been involved in the oil and gas sector?
Amaefule: I left Nigeria in 1974 for the United States. I got my Ph.D in petroleum engineering seven years later. Since then till now, I have been working around the world in the oil business. So, I have more than 25 years post-graduate experience. I started my carrier in the United States. Though I was US- based, I did a lot of work in Peru, Argentina, Australia etc.
Newswatch: You are an engineer and you have spent most of your working career in the oil and gas sector. Why did you choose engineering and what is the attraction in the oil sector?
Amaefule: I have been a lucky child. I went to secondary school on Eastern Nigeria scholarship, and came out with distinction. I was good at mathematics. Thereafter, I got a federal government scholarship to study petroleum engineering in the US. I got my bachelors and masters degrees in four years, at Southern California University, Los Angeles. I had my B.Sc and M.Sc the same day.
Newswatch: How where you able to achieve that?
Amaefule: It is the Lord’s doing. The brain was sharp then. We could burn candle on both ends, to meet our objectives. I made one of the best results in the school’s 97 years history. It was 99.9 percent white. I am a member of phi-cappa-phi. That is, when you graduate and you are among the top five in the United States, you are inducted into phi-cappa-phi. I also became the president of the tau-beta-phi. That is for all universities in engineering. Because of my academic accomplishment, I got a US federal government scholarship for Ph.D. After my Ph.D, I got a job in an oil company and the rest is history.
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