Corporate Affairs: Strategic Partner Unlocking Value, Creating Wealth in Joint Venture Partnerships and Production Sharing Arrangements within the Energy Sector and Beyond

By Dr Tunde Oyadiran

The oil and gas industry, inherently complex and capital-intensive, relies heavily on collaborative frameworks like Joint Ventures (JVs) and Production Sharing Arrangements (PSAs) to explore, develop, and produce hydrocarbon resources. While technical expertise and financial investment are critical for success, the full realization of value and wealth creation within these partnerships is often unlocked through strategic engagement with the socio-political and economic landscape.

This is where the discipline of Corporate Affairs (CA) emerges not merely as a support function, but as a vital strategic partner, adept at navigating stakeholder relations, fostering trust, and ensuring a conducive operating environment. This paper will explore how Corporate Affairs can be leveraged to maximize value and wealth creation within JV and PSA partnerships, with a particular focus on illustrative examples from Nigeria.

The Evolving Role of Corporate Affairs in Energy Sector

Traditionally, Corporate Affairs may have been perceived as primarily concerned with public relations, government liaison, and corporate social responsibility (CSR) initiatives. However, in the contemporary oil and gas sector, the mandate of CA has expanded significantly. It now encompasses:

Stakeholder Engagement; Proactively identifying, understanding, and managing relationships with all relevant stakeholders, including governments, regulators, local communities, international oil companies (IOCs), national oil companies (NOCs), investors, media, and NGOs.

Government and Regulatory Relations: Navigating complex legal and regulatory frameworks, advocating for favourable policies, ensuring compliance, and fostering constructive dialogue with governmental bodies.
Community Relations and Social License to Operate (SLO): Building and maintaining positive relationships with host communities, addressing their concerns, and ensuring that operations contribute to local development and social well-being, thereby securing the essential SLO.

Reputation Management: Protecting and enhancing the company’s brand and reputation through transparent communication, ethical conduct, and effective crisis management.

Risk Management: Identifying and mitigating reputational, social, political, and operational risks that can impact project timelines, costs, and overall profitability.

Value Creation through Partnership: Strategically aligning corporate affairs objectives with JV and PSA partners to achieve shared goals and mutual benefit.

Unlocking Value in Joint Ventures (JVs)

JVs in Nigeria, predominantly between IOCs and the Nigerian National Petroleum Corporation (NNPC) – now NNPC Limited – are structured to pool resources and expertise. CA plays a pivotal role in ensuring these partnerships thrive by:

Facilitating Government and Regulatory Harmony:

Navigating Policy Shifts: Nigeria’s oil and gas landscape has seen significant policy evolution, notably the Petroleum Industry Act (PIA) 2021. CA teams are crucial in helping JV partners understand, adapt to, and advocate for policies that promote investment and sustainable operations. This involves continuous engagement with the Ministry of Petroleum Resources, NNPC Limited, and other regulatory bodies like the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Securing Approvals and Licenses: Efficiently obtaining necessary permits, licenses, and approvals from various government agencies can be streamlined through effective CA engagement, minimizing project delays and cost overruns.

Building and Maintaining Community Trust:

Proactive Engagement: Understanding the socio-economic dynamics of JV operating areas is paramount. CA teams can lead initiatives that go beyond traditional CSR. For instance, developing local content frameworks that prioritize local employment, training, and procurement, thereby fostering a sense of ownership and partnership with communities.

Conflict Prevention and Resolution: Community grievances, often stemming from land use, environmental impacts, or perceived lack of benefits, can escalate into production disruptions. CA’s role in proactive dialogue, transparent communication, and establishing effective grievance redress mechanisms is critical to preventing and resolving such conflicts e.g. A JV partner might work with the CA team to establish a community development trust fund, co-managed by the company and community representatives, to fund projects aligned with local priorities like education, healthcare, or infrastructure. This collaborative approach ensures that community benefits are relevant and sustainable, strengthening the SLO.

Enhancing Partner Collaboration:

Shared Understanding of External Environment: CA can provide JV partners with a unified view of the external operating environment, including political risks, stakeholder sentiment, and regulatory changes. This shared intelligence allows for aligned strategies and coordinated responses, preventing divergence and fostering a more cohesive approach.

Joint Advocacy: When facing common challenges, such as unfavourable fiscal terms or security threats, CA can facilitate joint advocacy efforts by JV partners to present a unified front to government and other stakeholders, increasing their influence and effectiveness.

Unlocking Value in Production Sharing Arrangements (PSAs)

PSAs, prevalent in offshore operations, are contractual agreements where the government, through the national oil company, shares in the production of discovered reserves. CA’s contribution to maximizing value in PSAs is equally significant:

Navigating the Fiscal and Regulatory Framework:

Understanding PSA Terms: The terms of PSAs, including cost recovery, profit sharing, and tax regimes, are complex. CA must ensure that partners have a clear, shared understanding of these terms and how they interact with evolving national legislation, such as the fiscal provisions within the PIA 2021.

Advocacy for Stability and Clarity: CA plays a role in advocating for stable, predictable fiscal regimes that encourage continued investment. This involves engagement with the government to ensure PSA terms remain competitive and attractive for ongoing exploration and development.

Strengthening the Relationship with the Host Government/NOC:

Building Trust and Transparency: In PSAs, the NOC is a direct partner. CA’s efforts in building transparency, sharing operational updates, and demonstrating commitment to national development goals foster a high degree of trust. This can translate into smoother negotiations, more efficient approvals, and a stronger collaborative spirit.

Local Content and Capacity Building: CA can drive initiatives that align with government aspirations for local content, such as phased development of local expertise, technology transfer, and the creation of downstream opportunities.

This demonstrates a commitment beyond mere resource extraction, enhancing the overall value proposition e.g. An IOC operating under a PSA might partner with NNPC Limited, facilitated by CA, to establish a joint technical training program for Nigerian engineers and geoscientists. This not only builds local capacity but also strengthens the partnership by demonstrating shared commitment to human capital development, a key national priority.

Managing Offshore Community and Environmental Perceptions:

Environmental Stewardship: While direct community impact in offshore PSAs might be less immediate than onshore JVs, CA is vital in managing the perception of environmental responsibility. Transparent reporting on environmental performance, spill prevention, and response strategies, communicated effectively, builds trust with regulators and the public.

Stakeholder Communication: Engaging with national and international environmental watchdogs and ensuring clear communication about the environmental safeguards in place, is a crucial CA function. This can prevent reputational damage and support the project’s overall sustainability.

Challenges and Opportunities in the Nigerian Context

Nigeria presents a dynamic operating environment for JVs and PSAs. The oil and gas sector is a cornerstone of the economy, making government relations paramount. Key challenges and opportunities for CA include:

The Petroleum Industry Act (PIA) 2021:

This landmark legislation aims to reform the sector. CA teams are instrumental in helping partners navigate its provisions, understand new fiscal terms, and adapt to the unbundling of NNPC. Successfully integrating the PIA’s requirements for local content, environmental regulations, and host community engagement is a prime opportunity for CA to demonstrate value.

Security Concerns: Insurgency, oil theft, and pipeline vandalism pose significant risks. CA’s role in engaging with security agencies, local communities, and government on security matters, and in communicating the company’s commitment to safety and operational integrity, is crucial.

Local Content Development: A strong emphasis on local content is a national imperative. CA can champion initiatives that ensure Nigerian companies and personnel benefit from JV and PSA operations, fostering goodwill and aligning with national aspirations.

Transparency and Anti-Corruption: Upholding the highest standards of transparency and good governance is essential. CA must champion ethical practices and clear communication, particularly in dealings with government and regulatory bodies, to maintain trust and avoid reputational damage.

Conclusion

In the intricate world of oil and gas partnerships, particularly within Nigeria’s JV and PSA frameworks, Corporate Affairs has evolved into an indispensable strategic function. By proactively engaging stakeholders, fostering robust government and community relations, managing reputation, and ensuring regulatory compliance, CA acts as a crucial enabler of value and wealth creation. Its ability to bridge the gap between operational imperatives and the socio-political environment makes it a true partner in unlocking the full potential of these complex collaborations. As the Nigerian oil and gas sector continues to reform and adapt, the strategic deployment of Corporate Affairs will be more critical than ever in ensuring sustainable growth, shared prosperity, and the successful realization of wealth for all partners involved