Sustainable institutions will protect oil facilities in Niger Delta, says Okocha
Olisaeloka Peter Okocha Jr, the Managing Director of Star Delta Energy Services, is an entrepreneur with versed knowledge of contemporary Africa and current investment opportunities across sub-Saharan Africa. He has been involved in Oil and Gas, ICT, Shipping, Agriculture, and Real Estate investments for the past decade. Olisaeloka is the former Managing Director of Michelle Shipping. In this interview with ROSELINE OKERE, he emphasised the need for the Federal Government to create a sustainable institution in the Niger Delta region. Excerpt.
There has been unrest in the Niger Delta due to alleged neglect of the region. What do you think the Federal Government would have done to integrate the Niger Delta people into the management of their resources?
Comparing the current state of the Niger Delta to where it should be, considering its natural resources, it is evident that something is systemically wrong. Simply put, the wealth created from the resources in the communities of the Niger Delta is not being felt, let alone, enjoyed in the Niger Delta. The fact that the wealth is not being channelled back into these communities is the reason for the cry of neglect, and the subsequent pushback. This has always been a key reason for unrest in the Niger Delta. The only solution is for the Host communities to have direct involvement in the management of its resources. The Federal Government should have ensured two key things that would have prevented the current situation. It should have ensured that there was a process in place whereby a percentage of the proceeds earned directly from the exploitation of these resources, in this case, oil and gas, was set aside and channeled directly into the development of the host communities. Secondly, the Federal Government should have created avenues to enable the Host communities have direct ownership and management of its resources, through having equity in the projects being hosted in the Niger Delta communities.
Tell us about the objectives of Star Delta?
Star Delta is an independent Nigerian oil and gas company. It was formed by P.J. Okocha and Gbubemi Peter Agbowu. The objective of the company, as indigenes from the Niger Delta, has always been to find out ways to utilise our networks, relationships with international technical and financial institutions, and our local knowledge of the Niger Delta, to create value for the region through the creation and management of projects in the Niger Delta.
After close interactions and consultations with the various communities across the Niger Delta, it became evident that these communities thus far do not have the adequate vehicle to use to protect their interests in the process of exploitation of the resources on their land. Star Delta’s objective is targeted at providing this vehicle to the Niger Delta communities, by partnering with them and arming them with the technical and financial capabilities required to partake in, create, and manage projects in their communities.
You are agitating for a Special Purpose Vehicle system of operation in the Niger Delta. How would this initiative alleviate the plight of the Niger Delta people?
Star Delta developed the Registered Special Purpose Vehicle (SPV) system of operation, which it is advocating for adoption across the Niger Delta. By the nature of the SPV, each Host community will be represented directly in a registered company, which will be used as an entity to enter agreements, partakein existing projects, and create and manage its own projects. This initiative will definitely alleviate the plight of the Niger Delta people, as it will afford them for the very first time, vested interests in the resources located in their land. The SPV’s provides a vehicle that ensures the communities are on a level playing field with all other stakeholders in the resource exploitation process. For instance, the communities, through the SPV entity, can align itself with technical and financial companies to farm into current projects being hosted on its land, such as oil and gas blocks, and utilisation projects. The proceeds through its equity representation in the projects can then be directly channeled towards development of the communities. The SPV entity is a medium for the communities to chart its own development. It enables them, like any other company, get the pre-requisite licenses, approvals, market funding, and technical alliances, to develop and manage meaningful projects to utilise its resources; which will be a direct benefit to both the communities and the country as a whole, as these activities would raise more revenue for the Federal Government.
What are the benefits of SPV to the oil producing communities in the Niger Delta?
The advantage of the registered Joint Venture (JV) proposed is that it will give the participating community the rights to sue and be sued, and as a result have recourse in all agreements it enters – as opposed to a Memorandum of Understanding (MOU), which by nature is not designed to be legally binding. As a registered JV, the community will have the autonomy as any other registered company, allowing it obtain prerequisite licenses, approvals, to pursue projects, both on a commercial and social development capacity. Furthermore, with this mode of operation, as JVs will be setup for the different communities that comprise a Local Government Area (LGA); this will provide a level playing field and equal opportunities for the different communities, thus fostering unity – unlike the unhealthy competition for projects and patronage from the IOCs and operators, currently in existence.
A key benefit of the SPV structure proposed by Star Delta is the wealth of advantages it provides the Niger Delta indigenes simply through the administration and management of the entity. The clearly defined SPV administrative procedures and Shareholders Agreement provides transparency and a tailored use of the company proceeds for re-investment in business activities, development of social infrastructure, and the provision of a social security system for all indigenes of the represented communities. Case in point is our first registered SPV, called Isokurb Energy Resources Ltd (IER). Isokurb takes its name from the fact that it is a company registered as a joint venture between Star Delta and all the Isoko and Urhobo communities in Delta State.
IER is already aligned with technical and financial partners, and will be aggressively involved in the creation, execution and management of projects in the Isoko and Urhobo communities represented, and beyond. A significant feature of the IER SPV is in its administrative structure. A structure which is geared towards efficient use of company revenues towards the sustenance and development of the Host communities. For example, from revenues generated by the SPV, 50 per cent shall be dedicated towards “community dues”. This community dues will be distributed as follows; 20% for re-investment in the company’s capital projects, meeting cash call obligations etc. Another 20 per cent is dedicated towards infrastructure and social development of the communities, and the remaining 10% for investment in a social security/retirement fund for every indigene of the represented communities. Imagine this being replicated in all the SPV’s across the Niger Delta. This would undoubtedly alleviate the plight of the Niger Delta people.
There have been calls for the revocation of oil and gas blocks awarded without due process. What is your take on this?
These calls are understandable. For the sake of equity and transparency, any award of a licence, contract, etc. without following due process, is subject to revocation. This is applicable across all industries in all sectors, involving government approvals in procurement and bidding situations; the award of oil and gas blocks is no different. What is peculiar in this case is the fact that there has unfortunately been a lack of development of the Niger Delta, despite the fact that it is has abundant oil and gas resources, which acts as the pulse of the country. If you couple this with the fact that of the oil and gas block licenses awarded so far, an insignificant amount has been awarded to Niger Deltans. This is what has led to the calls for revocation of these blocks. What Star Delta is proposing through the administration of the SPV, is what will provide the value to the Niger Delta communities, spur development and give them vested interests in their resources through equity participation. The Federal Government’s adoption of the recommendations made by Star Delta in its manifesto will go a long way in quelling current tensions. These recommendations require the willingness and support of all stakeholders.
The Federal Government and the oil and gas companies need to accommodate the status and opportunities that the SPV provides the communities. For example, with the SPV’s being equipped with the financing and technical capabilities, the NNPC and the oil and gas companies should welcome and approve the farm in of these SPV’s into currently producing OML’s, so that the revenues derived in the short term, can be immediately channeled into the communities for development. The manifesto addresses such situations in more details. The manifesto also addresses these calls for revocation of oil and gas blocks issued to Non Niger Deltans, marred with irregularity. Star Delta believes that every resource available in Nigeria is open to exploitation and utilisation by any capable investor, as long as in the process, the Host communities are given a vested interest in that resource. Additionally and very importantly, Star Delta believes and advocates for the host communities to be given the Right of First Refusal in the allocation of oil and gas blocks located in its communities, going forward. For blocks already awarded, the SPV of the host communities where the blocks are located should be given equity in the blocks.
This is to enable the communities’ access to revenues in the short term, from the oil and gas asset. Subsequently, the manifesto asks for the Federal Government to determine an amount of time these contentious licenses should continue in operation, enough to enable the current investors/operators recover their investments and profits for the risks of Exploration. This “grace period” will ensure fairness and compensation to the current stakeholders of the blocks. At the end of the allotted time, which should be specified by the authorities per a specified formula, the blocks should be relinquished. After these blocks are relinquished, they should be rebid following a transparent process, but this time around giving the Host community SPV’s the Right of First Refusal on the blocks. This process will correct several mistakes made in hindsight. It will ensure that the issuance of blocks is done following due process rules and regulations. It also ensures that the host communities are given the opportunity to partake in projects it is hosting.
This will definitely close the issues of these contentious blocks being talked about. It will also curb the heating of the polity due to the agitations caused by a lack of equal opportunities being provided to the Niger Delta in the exploitation of its resources. This will lead to what Star Delta calls “balancing the Scales”; and would lead to peaceful development of the region; which is advantageous to the Nation as a whole.
How will the SPV help in ensuring the clean up of oil spill in the Niger Delta?
The SPV will be instrumental in ensuring the effective cleanup of oil spills and environmental remediation of the Niger Delta. The SPV, which is comprised of a JV between Star Delta and the host communities has technical partnerships with industry leading oil spill cleanup and remediation companies. What is being proposed by Star Delta is that the SPV uses the funds it derives from its equity participation in projects, to perform oil spill cleanup assessments of the affected areas. This will be performed by these technical partners, with access to site and approvals obtained from the Operators in the area, as well as the Federal Ministry of Environment. The assessment will ascertain the level of remediation, the cost implication and process required. The SPV will use this information to enter into a Call Off agreement with the cleanup companies.
In Star Delta’s manifesto, one of its recommendations is for the Federal Government to enforce a directive whereby every company operating within a pre-determined proximity to an oil spill site is required to dedicate a percentage of its Capital Expenditure/Operational Expenditure (CAPEX/OPEX) towards the cleanup of the site. This should be a pre-requisite for the Federal Government to approve the company’s budget for the year. This “cleanup expenditure” paid by the companies should be subject to taxation breaks offered by the Government, to incentivize payment by companies.
The idea behind this is for this dedicated cleanup expenditure to become a cost to be factored in conducting business in the Niger Delta, by oil companies. This cleanup expenditure should be held in a cleanup fund which should be provided to the SPV’s for the execution of the oil spill cleanup of its communities, through the Call off contracts it has in place. The management of the oil spill cleanup fund could be under the purview of the Federal Ministry of Environment. If the Federal Government can ensure the payments of the cleanup costs by oil companies in proximity to spill sites, coupled with the SPV’s technical ability to perform the cleanups, a great deal of oil spill cleanup and environmental remediation can be achieved in the Niger Delta; which will obviously improve the livelihoods of the people.
One of the major issues in the Niger Delta is unemployment. What do you think government should do to resolve unemployment challenges in the region?
A major issue in the Niger Delta is unemployment, and this is prevalent among the youths. A key reason for unemployment in the region is tied to the fact that there has been little or no development of the region. In addition to this, due to the unfortunate degradation of the environment by unchecked oil and gas operations, the traditional forms of subsistence such as agriculture and fishing has been eradicated. The high level of unemployment of the Niger Delta youths is a key factor for the restiveness in the area. A combination of the adoption of the SPV mode of operation by the communities,which will induce a multiplier effect and create employment, and the recommendations made by Star Delta in its manifesto, on the alleviation of unemployment in the region; this issue can be properly addressed and resolved