Improving Negotiations between Host Communities and Corporations

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The Department of Petroleum Resources (DPR) has committed to using its full range of regulatory and institutional oversight mechanisms to ensure that the rights of host communities are protected during benefit-sharing negotiations with corporations. This resolution was reached at a meeting held on October 6 between SPACES FOR CHANGE | S4C and officials of the Department of Petroleum Resources where S4C presented the findings and recommendations contained in its latest report, Natural Resource and Benefit-Sharing Negotiations Between Host Communities and Extractive Companies: A Case Study of Assa North and Ohaji South [ANOH] Gas Development Project. The report examined how the costs, benefits and community development agreements codified in the global memorandum of understanding (GMOU) executed between oil companies and communities are negotiated and implemented.

The Ford Foundation-supported report is based on the findings of S4C’s fact-finding missions and townhalls in thirteen (13) local communities in Ohaji/Egbema Local Government Area of Imo State, which are hosts to the companies involved in the ANOH project and other extractive activities in the area. The report raised some key issues for official consideration arising from the significant power and information asymmetry between corporations and communities. Some notable challenges fuelling the power imbalances at the negotiation table include the non-disclosure of critical project information, insufficiently-negotiated land compensation, exclusion of women in the community-company GMOU negotiations, company-created parallel structures of community engagement, poor implementation of community development agreements, and more importantly, weak regulatory and enforcement controls against environmental damage. The low environmental compliance records of the extractive companies operating in Ohaji/Egbema LGA can wreak havoc on the local environment if the destruction of farmlands, aquatic life and traditional livelihoods are allowed to continue.

For the most part, interactions between extractive companies and host communities have been carried on without the involvement from state departments, regulators and other impartial third parties including non-governmental organizations. The absence of state participation and third-party observation have entrenched the culture of imbalance during GMOU negotiations. GMOUs were unilaterally drafted by the companies and handed over to community representatives to sign, pointing to lopsided power relations between the negotiating parties. In light of these findings, it is imperative for regulatory agencies like DPR to exercise oversight during these negotiations and ensure companies’ adherence to relevant legal and regulatory framework for information disclosure, community consultation and engagement processes in large-scale infrastructure projects.

Receiving S4C’s findings and recommendations, DPR reiterated its commitment to ensure that the rights of host communities are protected during GMOU negotiations; ensure that oil companies’ obligations contained in signed agreements are adhered to, especially as regards the issue of fair compensation for land acquisitions and prevention of environmental damage. The meeting concluded with a joint resolution to collaborate to deliver technical support on contentious issues requiring regulatory intervention.

S4C’s Legal Officer, Chetachi Louis Udeh, led the organization’s delegation to the meeting held at DPR’s Zonal Operations Office in Owerri, Imo State. The meeting had in attendance, senior officials and management team of the DPR led by the Regional Operational Controller and the Agn Assistant Director of Operations. Other DPR officials in attendance include the Head of Engineering & Standards, Head of Health, Safety and Environment Unit, Head of Downstream Department, Head of Gas Operations, Head of Public Affairs Unit and Head of ICT unit amongst other officers of the agency.

It is instructive to note that Nigeria’s latest oil reform statute, the Petroleum Industry Act (PIA) specifically repeals the DPR Act, the Petroleum Inspectorate Act, the Petroleum Equalisation Fund Act and the PPPRA Act. By this repeal, the DPR does not exist anymore. Rather, DPR’s regulatory functions will now be transferred to two regulatory entities: Nigerian Upstream Regulatory Commission (The Commission) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (The Authority) respectively. S4C will continue the engagement on these issues with the two new regulatory entities. 

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