Nigeria is ranked seventh among gas nations in the world and number one in Africa. Oil and gas experts believe that Nigeria could even earn more from full utilisation of gas resources with a sound investment policy. ExxonMobil one of Nigeria’s biggest oil and gas companies recently appointed Alhaji Sadiq Adamu as Executive Director and General Counsel. In this interview with May Agbamuche-Mbu and Tobi Soniyi, the lawyer, author, poet and playwright expounded on a wide range of issues including Nigeria’s untapped gas potential, renewable energy resources, why the PIB is not the panacea to Nigeria’s oil and gas problems and ExxonMobil’s Corporate Social Responsibility Initiatives and local content policy.
Congratulations on your appointment as Executive Director and General Counsel of ExxonMobil. How do you intend to combine these roles effectively?
Accept my gratitude for your kind wishes. Up North in Wukari Taraba State my hometown, the people are celebrating the appointment. The combined roles of General Counsel and of Executive Director not just in one, but three different companies would, on the face of it, look daunting. The responsibilities will require me to play the lawyer-entrepreneur roles at the highest levels of corporate governance. I have been nurtured in the ExxonMobil culture of self-reliance, self-improvement and calculated risk-taking for more than twenty years; enough time for the process to reconstruct me for the job. The companies say I am ready and I have rolled my sleeves ready to evolve. I am a true seeker of knowledge, my seniors on the Boards are consummate teachers and the environment is conducive.
After the global recession new corporate governance codes emerged placing more emphasis on stricter compliance with reporting standards, this has led to the general counsel playing a more central role in compliance and risk-management in many companies. In your opinion how can the General Counsel meet with these high expectations?
This is already a norm in ExxonMobil. We are glad that global corporate governance culture has evolved to align with the ExxonMobil legal compliance traditional demands. Our hope is that the compelling need for what the company has preached for so long will become more and more manifest and gladly embraced as to be normative in all business environments. The GC is traditionally the company’s chief compliance officer. Whoever holds that responsibility ought to be primed to rise to the occasion, if for nothing, to justify the significant investment in his training both formal and on the job. There are no two ways about it. Daily work life in ExxonMobil is an experience in consistent continuous improvement.
Usually tensions exist between General Counsel and External Counsel due to a difference of objectives and organisational orientation. How would you advise General Counsel to overcome this challenge?
I believe it should be second nature for a GC to communicate effectively. That should be his/her first tool of trade. He/she has to be a good listener, one who listens more than he/she speaks. When you listen, you encourage defences to be lowered, and when you communicate clear appreciation of the other’s viewpoint, you affirm the relevance of the other’s contributions and both help to engender productive engagement. Communicating expectations in an atmosphere protected by attorney-client privilege should be relatively simple. Effective communication has done wonders for us. Ask the law firms that work for ExxonMobil. That’s what makes us different and it should work for everyone.
The non-passage of the Petroleum Industry Bill (PIB), is a major cause of concern for stakeholders in the oil and gas industry. The Minister of State for Petroleum Resources and Group Managing Director, NNPC Dr. Ibe Kachikwu, recently stated that the country was losing over $15bn annually as a result of the non-passage of the PIB. In your opinion what other consequences does the Nigerian Economy face as a result of the non-passage of the PIB?
Is the problem really with the PIB? I think it is time for Nigerians to ask one fundamental question – what is wrong with the existing laws that the PIB is intending to replace? I do not think anything is fundamentally wrong with the current legal regime. But let’s take a look at what investors require in order to invest in any country and these are things we take for granted in this country. Investors need stability in policies and laws to evaluate opportunities and make investment decisions. They also require respect for contract sanctity. Investors require security of lives and property. Many factors are taken into account before making any investment decision and if you change the rules midway, this will cause problems to the investor and his perception of the country as a hospitable investment destination. If an investor comes into the country and partners with any person, be it a private company or a government corporation, the expectation is that the partner will be able to respect commitments made, pay its own share of the cost of doing business. If this does not happen, you create an unnecessary burden on the other party. The perennial JV funding gap means that a significant number of viable projects cannot go ahead. The consistent JV funding gap is constraining the growth of our industry. These are issues we need to address and this can be done without necessarily having to pass a new law. Speaking personally, the often touted idea that the PIB is some kind of magic wand, the panacea of all of the industry’s challenges appears overrated.
The dwindling oil prices indicate that Nigeria has to develop a strategy to attract foreign investment into the Nigerian economy. What can the government do to encourage foreign investors?
It is about what I talked about earlier. We need to devote energy to creating an enabling business environment in this country. We must be conscious of the fact that investment funds are scarce and there are many destinations competing for investment. So we must offer an investment proposition that is attractive to the investor. The starting point is by asking ourselves the question why should an investor come to invest in the country instead of going elsewhere? This question, should, in my opinion, be of topmost priority. We should then put in place sweeteners that will attract investors to come to Nigeria instead of going to other competing countries. The common traits shared by jurisdictions that successfully attract foreign investment are stability of fiscal regime and the strong observance of the rule of law. Long term investments require long term planning and these require clear and stable fiscal regime, laws that are enforced and a business culture that defends sanctity of contracts. We must learn to do the things that others like Singapore, South Korea and Brazil have done. There are no two ways about it. This is more so in the face of evolving global economic trends; low crude oil prices, the bourgeoning cost of deep-water operations (Nigeria’s prime opportunities at the moment), the emergence and the appeal of alternative energy sources and so on and so forth. We must put forward investment policies that will attract new investors while encouraging those that are already here to stay.
Nigeria has a clearly defined Renewable Energy Program, under the direction of the Federal Ministry of Environment, however these energy sources are far from being proliferated on a commercial level by any means to near becoming alternatives to the use of Petroleum Energy sources. At what point do Oil producing countries like Nigeria, Venezuela and Angola need to begin to focus on renewable energy sources? What is the future beyond oil for Nigeria?
The global dependence on oil is quite broad and general; it traverses every facet of known economic activity. The alternatives are increasingly gaining traction. Nigeria has huge potential for renewables. It will interest you to know that Nigeria is essentially a gas domain; our crude oil potential is relatively minuscule when compared to our natural gas resources. The government’s investment in natural gas is so paltry. Countries like Qatar are significant global players. Everyone else in OPEC has integrated its hydrocarbon industry reaping considerable earnings from the economies of scale and the abundant multiplier economic effects like ample employment opportunities and industrialisation. Natural gas development is a low hanging fruit for Nigeria. With the kind of international oil companies presence in Nigeria all that is needed is very attractive gas development terms and the country will open up. All the big players are already here.
Specifically, a large part of the advantage Nigeria obtains from working with International Oil Companies such as Exxon Mobil is the knowledge and expertise that they bring to host nations. The transfer of knowledge and capability to Nigerian workers and the Nigerian labour force serving these IOCs is an imperative for the future growth and development of the industry, so what specific programs do IOCs operate to enable such transfer of knowledge and capabilities in support of the Oil and Gas industry?
The company has a global program for this initiative and it is very helpful to Nigeria and other countries. Currently, most of the workforce in Nigeria are Nigerians trained by ExxonMobil. The expatriates are paired with Nigerian understudies as required by Nigerian law. These are candidates to replace the expatriates when they are sufficiently trained for the required skills set. And we have been hugely successful in doing this. About 96% of our work force here are Nigerians who are trained by a small percentage of expatriates that have been brought in for that purpose. There are also many Nigerians posted to various ExxonMobil affiliates throughout the world either on development or work assignments to broaden their experience. I was a beneficiary of this initiative having worked with the company in the US, Qatar, Saudi Arabia, United Arab Emirates and Kuwait before returning to Nigeria in 2000. I and other Nigerians were also part of the Global Leadership Development Program, a program for a select few employees from affiliates all over the world handpicked for global leadership positions. Any person working for ExxonMobil in Nigeria is trained for capacity to work anywhere within the ExxonMobil world. That is a practical reality that many of us are privileged to be part of.
In spite of efforts by past governments to address the restiveness in the Niger-Delta, the crisis remains unresolved. How would you advice government to handle this issue?
The Federal Government of Nigeria and the relevant state governments are doing what they can to address the issues of the Niger Delta region. These are complex issues and there are no easy solutions. Initiatives such as the amnesty program is intended to assist in addressing the problem. But like all things, there is room for improvement. As a servant of the law, I am inclined to prescribe adherence to the law on occasions where responsibility and entitlement jostle for prominence. But I also remain mindful of the political dimension of conflicts such as this. In societies where adherence to the rule of law is normative, the law would compel governments to address the excuses that led to the insurgency. Ours is a fledgling democracy and like all fledgling democracies we need time to grow our feathers.
Conflict in the Niger Delta, incessant attacks on Oil pipelines, and whole regions contaminated by oil spills or destroyed by fires from Gas Flaring are all symptoms of failed collaboration between IOCs, the Government and local communities affected by the exploitation of Petroleum Crude. It goes without saying that the successful operation of IOCs’ activities in these affected areas requires the support and cooperation of local communities and so how should IOCs approach the delicate balance involved in the exploitation of crude oil and its harmful environmental effects on host communities?
I think we need to debunk the widely held misconception in this country that oil production is synonymous with environmental despoliation. That is far from the truth. Oil companies do not set out to damage the environment. Indeed, oil development is carried out in line with applicable environmental laws and standards and international best practice with close monitoring of the regulatory agencies.
Now to be honest, we do have some challenges in the process. There can be facilities upset or other challenges that may happen in the process of oil production. Our company is set up with processes and capabilities to manage those upsets and challenges in such a way that will limit impact on the environment.
For us in ExxonMobil, commitment to environmental protection is of topmost priority irrespective of where we operate in the world. We consider this as a licence to operate issue. We will rather not carry out an operation if it cannot be done safely. We comply with Nigerian laws and international best practice in our operations. Every employee knows the importance attached to the environment and safety and the reminders are so common place and frequent it is imbibed and has become second nature. So it is not correct to assume that oil development is tantamount to environmental damage. That point must be made clearly. To the other question, I must say that we recognise communities as important stakeholders in our operations. NGOs and other stakeholders are advocating corporate social responsibility and operators are listening. Significant resources are deployed to host communities’ development with appreciable results. The improvement in derivation funds, the creation of the Niger Delta Development Corporation and the Ministry of the Niger Delta are positive government initiatives to enhance government’s presence in the region. Hitherto, the only government the communities saw were the IOCs and their contractors in their midst. We need a collaborative approach in addressing community issues. Both the government and the IOCs need to engage more with the communities for dialogue and grassroots buy-in to programs. Such engagements will create an opportunity for host communities to better understand our operations and present a feedback opportunity to assist in planning and coordinating future programs. As they say, “Jaw-jaw will always help avoid war-war.” Concerning operational safety and environment, the regulatory agencies need to focus more on enforcing compliance with standards of the law particularly in those areas where those standards are flouted.
Good Corporate Social Responsibility initiatives are necessary to boost, the relations between oil companies and the community in which they operate. What are your company’s corporate social responsibility initiatives?
ExxonMobil is a pioneer in corporate social responsibility in Nigeria. In fact we are very proud of our record of achievements in corporate social responsibility. I will just mention a few; Since 2005, we have spent N2.5Bln Naira on Nigerian women in initiatives such as Global Women in Management and Women in Management Business and Public Service; We have spent over N19Billion in the fight against malaria which has benefitted over 105 Million Nigerians, including 30,000 pregnant women. The company has been actively supporting host community development from the inception of its operations in Nigeria. It is one of the company’s key policy objectives. Over the years, the company has built primary and secondary schools, sponsored thousands in Nigeria and overseas through tertiary education scholarships, and has youths’ apprenticeship programs for technical skills acquisition. These are in addition to building infrastructure such as roads, drainages, hospitals, community centres, sporting and recreational facilities, and providing access to portable water in many rural and urban communities. Corporate social responsibility is an annual budget item for ExxonMobil in Nigeria. Just visit any of our host communities you will see physical evidence dotting the landscapes. As you will know, our effort in this respect has been widely recognised in the country. Just last year, ExxonMobil affiliates in Nigeria were voted the 2015 Best Company of the Year in CSR by the Social Enterprise Report and Awards (SERAs). The Company also received the awards for Best Company in Poverty Reduction and Best Company in Infrastructure Development. We are the first Oil and Gas company to have achieved this feat in Nigeria!
Nigeria is estimated to have about 188 trillion standard cubic feet (SCF), of gas reserves, making Nigeria the nation with the seventh largest gas reserves in the world and number one in Africa. What reforms should be introduced to the gas regulatory framework to enable us effectively harness our natural gas potential?
Like I said before, Nigeria is essentially a gas country. The government needs to incentivise natural gas development to attract the required investment. Similar to crude oil development, natural gas monetisation is capital intensive. You need to attract the guys with the big pockets. To do that you need to create the right investment climate. For example, the Joint Ventures have gas development terms. That may be why we have huge revenue earning ventures like the Mobil NGL project in Bonny Island and the like. These are developing associated gas produced with crude oil that would have been flared. Actual gas fields onshore, in shallow waters and giant fields deep offshore are all ready for development. The government needs to create development terms and the time for it is now. As you may be aware, natural gas is the energy source of the future. In fuelling electricity alone, it is a product with universal demand. Just imagine the existing global demand for electricity and its exponential growth daily. The demand is there and it is huge. Natural gas has other uses not commonly known like fertilizers manufacturing, polyethylene for the manufacture of plastics, insecticides and other pesticides, pharmaceuticals as well as additives in the manufacture of many things like cell-phone parts, automobile parts, aeronautics, cosmetics, electrical appliances and so on and so forth. To crown it all, the big players in the global industry are already here. Just roll out the drums and the dance will begin. So what we need here are some catalysts to kick start a revolution in the sector. Also, we need gas terms for PSCs. Billions of cubic feet of gas are locked in there simply because there are no gas terms to monetise them.
The Nigerian Content Act was passed to increase the participation of indigenous oil companies in the oil and gas industry. Despite this development indigenous oil companies still struggle to navigate the challenges that exist in the oil and gas industry. How do we ensure that indigenous companies are given the opportunity to grow?
To my mind, the Nigerian Content Act creates the best opportunity for Nigerians to participate in the oil and gas industry more than any other legislation in recent times. It provides local companies an opportunity to participate in the sector and helps them develop the necessary skills to service the industry. The intent of the law is laudable, but may require tweaks here and there. One critical issue is access to capital by smaller companies. In our particular case, we are committed to the promotion of local content development. In the last couple of years, we awarded contracts worth over N230Bln with Nigerian content value exceeding N120Bln and provided local contractors access to over N1.4Trn. We remain committed to pioneering feats in local content development and this feat was recognised by the award to ExxonMobil as the Best Company in Local Content in Nigeria from Businessday Newspaper last year. In my view, the opportunities are there, low hanging fruits to be plucked. Nigerians can also look to other jurisdictions with similar legislation like Saudi Arabia to borrow a leaf on how to maximise the opportunity. There must be significant focus on building capacity in terms of support infrastructure and skilled manpower. Both cannot be wished away if success is the ultimate objective. Nigerians must hunker down and build capacity. They must attract foreign partners with proven performance records and surround them with Nigerian understudies, approach things with the humility of the true seeker of skills, the mechanic apprentice and allow for a significant gestation period for the skill sets to mature. I mean both the skills in enterprise management and the technical knowledge. We have no option but to sweat it out like others in the developed world did. That penchant for instant gratification must be thrown out the window. This is a multibillion dollar industry with globally established safety and performance standards.
Analysts predicted that oil prices would drop to as low as $20 per barrel. Could this mean we have not seen the worst in terms of dwindling oil prices?
This is anybody’s guess. But I know that oil is a fungible commodity, an international product whose price is influenced by geopolitics, economics, weather, war, shipping and simply by periods of contango and backwardation. In my view, looking at the last thirty years of prices of oil, the current price phenomenon may be cyclical. It appears to happen every ten years or so. The prices may recover but not even a seer can tell you precisely when this would happen.
Stakeholders in the oil and Gas Industry have stated that the decline in oil price provides Government with a unique opportunity to diversify its revenue base and reduce dependency on oil. What other viable sources of Public revenue do you believe are as yet untapped?
There are many. I can reel out the numbers; natural gas development, hydroelectricity, solid minerals, agriculture, the education industry. Take the last one for analysis. If the government grows the courage to make primary and secondary education free and compulsory, domicile a portion of government export receipts in Nigerian banks to support University study loans for all eligible Nigerians, all the major Universities in the world will have campuses in Nigeria. A huge percentage of the population will be educated. Everything in the country will change; our politics, respect for the rule of law, universal economic empowerment, even the way we appreciate each other. The opportunities are varied and attractive. Again, to make this happen, one cannot emphasise enough the importance of adopting appropriate investment policies and laws that will make the economy investor-friendly and open all of these to very active participation by both foreign and local investors and entrepreneurs.
The President Muhammadu Buhari stated at the 6th African Petroleum Congress and Exhibition that it was unacceptable for Nigeria to be responsible for 23 billion cubic meters of the 40 billion cubic meters of gas flared annually in Africa, and promised to partner with the legislature to ensure the signing of the United Nations Agreement of “Zero Routine Flaring by 2030”. What steps should government and stakeholders take to achieve this goal?
The government must invest in natural gas monetisation the way it has invested in crude oil development. Indeed the development of the gas sector should be made a national priority. There are salient issues that must be addressed here. Nigeria must set attractive gas development terms for both the backbone infrastructure that support gas, resolve the lingering JV funding issue, provide efficient and effective regulatory framework for timely, transparent and efficient approval of projects, ensure contract sanctity as well as independent and fair dispute resolution mechanisms. Right now, the price of gas is being regulated. There will be need to deregulate the sector. These will help energise the sector for investments. The resources are there. So are the big players and the thirsty markets. Flared gas will turn to cash gas literally tomorrow. The only missing puzzle is the appropriate enabling environment. It may interest you to note that the ExxonMobil companies in Nigeria have achieved a less than 10% flare out rate within the past 10 years.
The Federal Government has repeatedly stated that it plans to remove fuel subsidy. What is your view on the removal of fuel subsidy?
I fundamentally believe that prices are determined by market forces. Having said that, I also recognise that there are more complex issues at play in this instance, and that the government will, ultimately, make the right decision.
Corruption is often blamed for our inability to use revenue generated from the oil industry to develop the country. This is referred to as the “Resource curse”. How can we introduce accountability and transparency in the use of national revenue to overcome this curse?
To me, we need to deal with the issue of integrity in this country from a very basic level. We need to preach the importance of integrity from the family level to our schools and to every strata of our society. Any society or institution without integrity and ethics is doomed. If we want to get out of our present quagmire, we have to go back to our roots, the values of integrity, ethics and hard work. These are fulcrums which the founders of our nation held dear. This will percolate down to every strata, be it in the management of our national resources or any other thing. There is no other way. Also, we must show that those who go against these values are punished to serve as a deterrent to others.
International Arbitration is favoured by stakeholders in the oil and gas industry because of its speed and the confidentiality of proceedings. However parties including Nigerians choose London and Paris as seats for arbitration. Being a Director at the Lagos Court of Arbitration, what steps can be taken to make Nigeria an attractive seat for arbitration?
For starters, we all need to encourage enhanced respect for the rule of law. That is a general statement that dovetails into the issues of insecurity, judicial interference with arbitral awards and processes, greater respect for sanctity of agreements, easy enforcement of awards, just and fair consideration of arbitral disputes and so on and so forth. On the specifics, ADR is a global phenomenon that is gradually but surely outstripping litigation in the settlement of commercial disputes. Nigeria needs specific focus on ADR through concerted investments in support infrastructure, training for arbitrators and support staff and above all a cultural shift that encourages ready acceptance of the finality of arbitration awards. Lagos Court of Arbitration is a bold statement in that direction. The facility is state of the art, affiliation is widespread in Lagos, Abuja, Kano and Port Harcourt. Recently, judges from Ghana and South Africa came snooping around for membership. Very soon the quality of services will further advertise the facility globally and that will attract the kind of attention London and Paris have coveted for so long. We will get there. I am certain of that. LCA is a starter; an excellent foundation for ADR in Nigeria and sub-Saharan Africa as a whole.
You were the President of the Contemporary Literature Society of Nigeria and Writers’ Drama club and also authored many books including “The Man Alone”, “The Way of the Mustard Seed” and a play “Were I to Surrender”. You are also a distinguished poet and your sonnet “Muffle the Nightingale” was published in the contemporary edition of the English Pageant of Longer Poems and your other poem “Walking between Raindrops” was well-received. Being a successful lawyer, what inspired you to venture into the arts? What is your opinion on the relationship between law and literature?
Law and literature are conjoined twins. Literary artists and lawyers sculpture arts on the canvass of words. Relying on the power of superior argument, an advocate creates and defines reality in a perspective that did not exist before. He creates a lurid picture, sells it to an audience and persuades acceptance. That is his trade. A literary artist uses creative imagination to fashion a reality that his audience appreciate profoundly. He uses the power of words to evoke an imaginary reality that captures perception and persuades acceptance as real. Both are artistic users of words to persuade. Let me use one example each from Lord Denning, MR a beacon of the Law and William Shakespeare the doyen of the arts. Denning said this about literature, “Of all the things in which the wise excel, nature’s CHIEF MASTERPIECE is writing well”. Permit me to paraphrase Shakespeare playing the lawyer in the words of Portia (Merchant of Venice) – ‘mercy drops like gentle rain from heaven upon the place beneath it. It has double blessings. It blesses him that gives and him that receives it. It is a finer ornament of a King than his crown for it is the quality of God Himself. Earthly power comes nearest to God’s when mercy is mixed with justice. As we pray for mercy, that same prayer should teach us show mercy’. Therefore, where the artist is meshed in a lawyer, you have convergence. Both the lawyer and the literary artist are in the trade of NATURE’S MASTERPIECE.
You are also actively involved in the activities of various associations and clubs such as the Harvard Club of New York, the Harvard Alumni Association of Nigeria and the International Bar Association and the Nigerian Bar Association (NBA). What can the NBA do to encourage the participation of its members at all levels?
The Military did their things and passed Decrees the whole nation was compelled to abide by, with no contribution from anybody. We have a democracy now and the Constitution allows citizens’ contribution to legislation. The NBA should take that opportunity to develop Legislative Advocacy as a practice field. There is no reason why the NBA should not contribute position papers on every legislation before all legislative houses in Nigeria. Social media presents a veritable tool for promoting social change. The NBA should harness its potential maximally, joining issues with other stakeholders on issues such as ethics, good governance practices, promotion of arts and culture and general awareness on the workings of the Constitution. We need to actively participate in our democracy, sponsoring bills and representing interest groups in advocating legislation over things that matter to the common man. The NBA also needs to spearhead the development of indigenous commercial agreement precedents as guides to legal drafting. Lawyers must also learn to give back to the society; social responsibility – endowments in support of education; support for girl-child education, sponsoring chairs in law faculties. We need to be more visible promoting national integration, patriotism, and encouraging debates on topical issues that emphasise a common faith in the Nigerian enterprise. We have played backbenchers for too long, encouraging persons at the bottom of our social pyramid into positions of leadership and then we sit back and complain how bad things are in Nigeria.ThisDay.