Social Responsibility and the Sustainable Economic Development of Oil and Gas Producing Communities in Nigeria

Abstract

Abstract In the this century, the social responsibility of oil and gas companies will include not just health, safety and environment, but also the sustainable economic development of host communities. Today, in most host communities around the world, local community organizations protesting environmental pollution and economic underdevelopment are making it impossible for oil and gas companies to operate without engaging in social engineering or economic development activities. In Nigeria, the local community struggles have interrupted operations on numerous occasions leading to declarations of force majeure. In the last five years, these interruptions have become widespread, better organized, and more violent. Company workers have been kidnapped for ransom, hostages taken, flowstations and other surface facilities occupied and access roads to plants and offices blocked. This paper examines the struggles of local grassroot organizations for sustainable economic development and environmental conservation in the oil and gas producing areas of the Niger Delta of Nigeria. The impact of oil and gas operations on the environment and the development of the communities are also examined. The linkages between environmental conditions and sustainable economic development are highlighted. The relationship amongst the host communities, oil companies and Federal Government of Nigeria is analyzed in detail. A project economics model that captures the cost and benefits of investments in sustainable economic development is developed. The paper concludes that the social responsibilities of oil companies should encompass the sustainable economic development of host communities. An economic evaluation model that captures profitability from the perspertives of the oil companies, the host communities, the Nigerian government and the shareholder is recommended. This approach encourages the cost-effective participation of the inhabitants of the host communities, the oil companies, the shaeholders and the Nigerian government in the economic development process. A balanced growth strategy is proposed for the sustainable economic development of host communities in the Niger Delta of Nigeria. Introduction In many developing nations, the inhabitants of host communities are engaged in struggles against oil and gas companies and their home national governments. These struggles are aimed at the conservation of the environment and the sustainable economic development of the host communities. They take the form of peaceful protests, takeover of facilities, kidnapping, hostage taking and armed struggles.1 The national governments, often partners with the oil and gas companies, attempt to contain these struggles with the use of force and violence. The expenditure on security increases and domestic security forces violate the human rights of members of the host communities. Increasingly the business of producing oil and gas in developing nations is raising issues such as human rights, sustainable economic development, corporate responsibility, international standards, fairness, social justice, the rights of indigenous people and environmental conservation.2 For example, in Columbia, there were 23 oil sector related kidnappings in the first ten months of 1999. Foreign workers were involved in 11 of these cases. In 1998, 40 foreign workers were kidnapped. The Occidental Cano Limon pump station and pipeline which controls one third of Columbia's oil exports have been attacked by left wing insurgents 508 times in its eleven years history. It is estimated that $530 million was paid as ransom for 2137 hostages since 1995.3 The Columbia government has responded by militarizing the host communities. Government soldiers and right wing para-military forces terrorize members of host communities in search of activists and sympathizers of the insurgents. A war tax of $1.00 per barrel is imposed on oil companies. Security expenditures make up about 8% of all oil and gas investments compared to 1% for the rest of Latin America.4