Expert Opinion

Nigerian Petroleum Industry Bill 2012 – Petroleum Host Community Fund (PHCF)

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MODEL: INDORAMA ELEME PETROCHEMICALS

Indorama Eleme Petrochemical Ltd (IEPL), located in Port Harcourt, Rivers state, Nigeria, was a 100% subsidiary of Nigerian Government-owned Nigerian National Petroleum Corporation (NNPC) with the name Eleme Petrochemicals Company Limited (EPCL). The Indorama Group acquired the EPCL under the 2006 privatization program in Nigeria.

Indorama Eleme Petrochemicals operates a model in which communities have a 7.5% Equity Share Partnership. In the last few years, this has translated to an annual dividend of more than N4billion per annum for six communities.

With this model, the IEPL has gone on to be a very successful company, recording achievements of smooth and stable operations enhanced production capacities, winning several global awards and certifications and has become a successful model of Nigeria’s Privatization Program. Only recently(4), the company signed a Project Financing Package for US$ 1.2 Billion Greenfield Urea Fertilizer Plant in the same host community(5).

SECURITY COST IN THE NIGER DELTA

 Using Shell Petroleum Development Company (SPDC) as a case study, Shell spent about $383million on security between 2007 and 2009 in Nigeria. In 2008 alone, Shell spent more on security in the Delta than in the Americas, European Union (EU) and Russia combined(6).

Enhanced peace and stability would greatly reduce security cost for oil producing companies while also enabling stable production in the Niger Delta.

While it is true that the PHCF would not be a silver bullet to eliminate all security or community/ oil and gas company dispute in the Niger Delta, it would be s positive step towards addressing some level of dissatisfaction felt by host communities.

The PHCF could end up being counterproductive if it is not managed properly.

 

4 In February 2013

5 For details on Indorama’s Eleme Petrochemicals, please see the communities sub tab, under the social responsibilities tab on the company’s website or on this link HERE

6 (See Figures 1 and 2) Next Page. Figures 1 and 2 from Dirty Work: Shells Security Spending in Nigeria and Beyond—Ben Amunwa , Platform .

 

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