Creating shared value with host communities helps Seplat compete

For many indigenous oil and gas companies operating in Nigeria, the key to sustainable operations is often how efficient you are at drilling below the ground and managing relationships above it.

But how does a company navigate through volatile oil prices, a tough legal and regulatory system and often hostile reception from host communities whose memories have been seared by previous engagements that went awry and wrought on abuse and neglect?

For Seplat Petroleum Development Company, a leading independent upstream oil and gas company in Nigeria, its starts with creating a strategic framework to engage with its host communities.

To manage relations effectively, the committee responsible for this at Seplat reports to the board. This structure ensures that the company’s CSR activities reach the grassroots of the communities where it operates. And there are indications that Seplat is on the right track.

On September 19, 2019 at Izombe, Imo State, two women were attending Safe Motherhood, a medical CSR initiative of Seplat when they went into labour. Few hours later they were delivered of two heathy babies. Some members of the community at the event jokingly remarked that Austin is an appropriate name for one of the babies. A subtle reference to Mr. Austin Avuru, the Chief Executive Officer/executive Director of Seplat. That is the extent to which Seplat is knit into its host communities.

In 2014, the company signed a Global Memorandum of Understanding (GMOU) with the local communities that host its operations within OMLS 4, 38 and 41. The GMOU sets the standard for subsequent engagements with stakeholders and was updated two years later.

This strategic framework is useful in managing expectations. It also provides a basis to evaluate shared value – an operational practice that enhances a company’s competitiveness at the same time advancing the economic and social value in its host community.

Seplat invests in areas that align her business objectives with local priorities whilst addressing broader developmental objectives. If expectations are badly managed, CSR activities can make people feel entitled and the company resentful. Shared value, which results in the best outcomes, is not about redistribution, but expanding the pool of economic and social value.

Companies that achieve the best results think in terms of shared value, maintain transparent communication with all stakeholders and ensure multi-party engagement with the community, civil-society groups and the government.

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In 2018, Seplat held 298 community meetings, 19 meetings with traditional rulers and four town hall events while it continued to invest in community projects, supporting infrastructure development, education and health programmes in the areas around her assets. These engagements coupled with proactive efforts and fast response to issues have given an edge to local companies in managing community relations in Nigeria.

Different approach

The key pillars underpinning Seplat’s CSR activities are maintaining high health and safety standards, driving sustainable supply chain, local content and a positive social impact.

Health, Safety and Environment.

Seplat closely aligns its HSE Policy with guidelines issued by the International Association of Oil & Gas Producers (IOGP), further supplemented by the Company’s own policies. Most of the world’s leading publicly traded, private and state-owned oil & gas companies, oil & gas associations and major upstream service companies are members of IOGP and collectively produce 40% of the world’s oil and gas.

To abide by these standards, Seplat has cut gas flaring significantly between 2011 and 2017 by using the gas internally and now plans to cut out gas flaring completely soon.

In a world where global emissions threaten the earth, it is in the company’s enlightened selfinterest to contribute to mitigating the effects of climate change. For Nigeria which is responsible for 11% of global gas flares, it is critical.

In the company’s audited report for 2018, it said it had consistently improved its Lost Time Injury Frequency Rate (LTIF) towards zero and in 2018, its LTIF was 0.14, a significant improvement on the prior year LTIF of 0.31. The company has also successfully avoided any employee or contractor fatalities.

Supply chains

Shared value creates outcomes that benefit all parties. When companies source supplies locally it has positive multiplier effect on the local economy and contributes to a thriving and competitive local market.

Seplat reports that it is using local business partners which can simultaneously reduce operating costs and project risks by developing a mutually-beneficial relationship with the Company’s local partners.

Recruiting talent locally is smart policy as it helps to mitigate risks. People are less inclined to blow up their livelihoods. An inclusive approach lessens operational disruptions, reduces costs and increases value for shareholders.

Local content

Local content is statutory obligation for oil companies operating in Nigeria. Seplat was one of the first indigenous Nigerian companies to directly acquire blocks from the major IOCS so its operations align with the vision of the government. Seplat is estimated to operate over 20% of Nigerian indigenous oil production and supplies processed gas that underpins up to 1/3 of on grid Nigerian power generation.

“Seplat’s success is perhaps because of their local knowledge and proactive engagements with their host communities,” says Ayodele Oni, an energy lawyer and partner at Bloomfield law firm.

Local content is critical for Nigeria rich in natural resources but unable to translate much value for its people because the oil sector is operated in isolation from the rest of the economy, thereby allowing minimal participation from local citizens in its development.

For example, prior to 2010, nearly US$380 billion and 2 million jobs were estimated to have been lost as the majority of construction, engineering and procurement undertaken by the IOCS was carried out overseas. But since 2010, more than 30,000 direct and indirect jobs have been created for local Nigerians in the oil and gas sector.

“Indigenous companies such as Seplat have been instrumental in maximizing opportunities for local content development at their operations. In 2018, 99% of the Company’s entire workforce was Nigerian and Nigerians account for nearly 80% of the Company’s top management positions.” says Adeola Adenikinju, an oil and gas expert.

Social impact

Seplat has instituted social investment programmes targeting immediate impact projects at the community level, identified after the completion of all Environmental and Social Impact Assessment studies. These include healthcare, education, economic empowerment/ capacity building, infrastructure development and environmental stewardship initiatives

For the company’s flagship health initiative, ‘Eye Can See Programme’, beneficiaries have their eyes tested; receive prescribed glasses and some had surgeries for cataract related visual impairments.

The ‘Safe Motherhood Programme’ has seen beneficiaries including pregnant women and nursing mothers, receive lectures on danger signs of pregnancy and nutrition in pregnancy. They are also presented with Safe Motherhood kits made up of a maternity bag, vitamin supplements, treated mosquito nets and all medical items required for safe delivery.

At the recently concluded intervention which took place at Izombe, in Imo state, Ebere Ihedioha, wife of the state governor, who flagged the medical outreach open said: “If all the corporate organisations were to tow this route of SEPLAT petroleum today, the burden of underdevelopment and social restlessness particularly in the oil producing areas in the state would be greatly reduced. This programme therefore places SEPLAT Petroleum at the top of the Corporate Social Responsibility in the state, and by extension has won the hearts of our people.”

In the company’s response, Chioma Nwachuku, general manager, External Affairs & Communications, representing Austin Avuru, CEO Seplat,

said: “People are at the center of everything we do. The NNPC/ SEPLAT joint venture takes delight whenever we have opportunity to deploy these two key programmes specially designed for the wellbeing of our community members and for other indigenes of the state who wish to access the benefits of these health progrommes.”

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To better equip children within the local communities with the cognitive capabilities and skills to become catalysts for social and economic growth, Seplat has invested in post-primary education in the Niger Delta since 2010. A total of 847 post-primary school placements have been sponsored to date.

In its 2018 audited accounts, the company reported $64million investments in social investment programmes. It will commence this year’s ‘Eye Can See’ and ‘Safe Motherhood’ programmes at 13 centres to cater for numerous communities close to its operations in Imo and Rivers states. Both programmes are provided in collaboration with seasoned health practitioners.

So far, 3,586 expectant mothers have been impacted by Safe Motherhood in the Eastern Asset over the last 2 editions and the company has treated 7,343 patients in the Eye Can See programme, dispensed 2,200 reading glasses and successfully performed 233 eye surgeries in two years.

These activities have improved the quality of life in host communities, smoothened relations between host communities and the company and ensured a safer working environment for Seplat and its partners.