STAKEHOLDERS MANAGEMENT IN THE NIGERIAN OIL AND GAS PROJECTS: CHALLENGES AND PROSPECTS

ABSTRACT

Nigeria is blessed with natural resources, and oil and gas are some of them. The country earns most of its external revenue from exporting these two commodities. Oil and gas play key role in the country’s economy, as a matter of fact; oil constitutes the major source of income. The study aimed at identifying challenges faced in managing stakeholders’ expectation by the industry practitioners in Nigeria during project delivery. It is also sought to understand the approaches usually adopted to resolve them and identify the gaps that could be improved upon to bring about better relationships among the stakeholders.The methodology adopted is based on survey research, an approach credited with effective means of putting research data together. The survey is carried out using online questionnaire for data gathering to acquire the necessary information from sample population drawn from project organization of Shell Nigeria. The result of the exercise shows that project organizations are more focused on managing challenges that could emanate from contracting and procurement activities above any other issues because apart from funding, the next critical success factor to a project is the ability to manage services, materials, equipment supplies, and contractual obligations. They are more focused on managing cost escalation and mitigating against safety issues that may arise from poorly managed relationship with those stakeholders that provide this set of services. They based their convictions on their risk exposures on past projects and the industry at large that if relationships with Engineering Procurement Construction (EPC) contractors are not properly managed, it could result in disaster that could have impact on people, environment, asset, and reputations, as well as cost them their License To Operate (LTO).The next set of stakeholders whose issues are given necessary attentions are the government regulatory agencies, and the joint venture partners who most often are on the same pedestals with them because they must have keyed-in into the value propositions at the project formulation stage. This goes to explain why relationships with host communities usually anything but smooth because their issues are often seen as secondary at this stage and they sometimes linger into the operational phase of the asset.

Nigeria produces oil and gas in commercial quantities and substantial part of these are for export. The country is one of the top two producers of the commodities in Africa. Commercial production of oil in the country is dated back to 1958 at Oloibiri, one of the rural settlements in the Niger delta region of the country (NNPC,n.d; Edo,2013; KPMG, 2013), with early production figure put at about 5,000 barrels a day. Current production is estimated to be about 2.2million barrels per day and as at reserve audit figures of 2012, proven reserves for crude oil, natural gas, and non-associated gas are estimated to be 37.2 billion barrels, 165 trillion standard cubic feet, and 75.4 trillion standard cubic feet (NNPC, n.d) respectively.

The local market has the presence of both international oil companies (IOC) and indigenous producers who are active players in the exploration and production to serve both the local and international markets. These commodities play major role in the country’s economy, they are the major sources of income, and the country earns most of its foreign exchange through their export (Giwa-Osagieand Ehigiato, 2015).

Delivering Oil and Gas project in an emerging economy and a multicultural environment like Nigeria could be thought-provoking. There are so many factors that often confront players in the industry (Okpanachi, 2011). Some of these do have significant impact on project timeline and invariably cost overrun thus making it exceptionally challenging to deliver projects in this sector (Aaron, 2012). One of such factors identified as a major one, is the challenge of managing different stakeholders in the industry. This group comprises of the industry regulators, services providers, environmental watchdogs, indigenous land owners, and financial sponsors. Their influences are of great importance and the outcome of collaborative efforts and engagements with them often decide the success or failure of project in the industry. 

Freeman and Evan (1990)defined stakeholders as parties or interest groups that extend services or resources to an organization or have stake in contemplated actions planned to be taken by an organization. Stakeholders play major roles in the industry and their buy-in and cooperation on any project in the sector are part of the critical success factors.  The key stakeholders who have major influence on project delivery in Nigeria oil and gas environment are Joint Venture Partners, Government regulatory agencies, suppliers and contractors, Host Communities, Business Sponsor / Steering Committee, and Non-Governmental Organization (NGO). Projects in the sector often run into hiccups when issues with these stakeholders are not resolved as soon as they come up during projects lifecycle.