Joining Forces for Sustainable Communities
Several years ago, I was at a Texas A&M University football game in a suite sponsored by the dean of the College of Agriculture, so not my usual engineer crowd. I introduced myself around, and one of the other guests said something I still remember, “I work for the Gates Foundation. My job is to give away Bill Gates’ money.” I remember thinking what a great job! Wouldn’t everyone love to play Santa Claus with Bill Gates’ billions? Wouldn’t we all love to be able to have Bill Gates’ impact on the world as his foundation invests in global development, health initiatives, and US education?
In a way, we do. Global, multinational companies often make commitments for local infrastructure as a condition to do business in host countries. These infrastructure projects often require companies to build clinics, schools, roads, and power and water supplies in areas where the local government cannot or does not provide them. Oil and service companies are not different—we often build community projects, but they don’t always last. I have traveled extensively in Africa, and in more than one country, I have seen faded USAID signs on dilapidated clinics and schools. US tax dollars set up this needed infrastructure, but the projects are not sustainable because there aren’t local agencies with the ability to run them. These development projects are part of the risk our companies take to do business in developing nations, and we all hope for a reward for the local communities with real, sustainable improvements in their lives because we were there. But these development projects don’t always work as planned.
I first realized the power of oil company cooperation with local nongovernmental organizations (NGOs) many years ago in Latin America. An oil field was located in a rural area about 40 km from a large city. The community had a local elementary school; but for high school, students had to travel into the big city. As a result, many local kids didn’t attend high school. Girls were especially likely to drop out because their parents were concerned about safety and traveling home often after dark. There was a real need for a high school in the village near the oil field.
The operator had made a commitment to invest in the local community and had already built a health clinic, which the government staffed with local doctors and nurses. The high school was the next priority project, but there was jockeying between local politicians over who would control the funding and the school. The operations manager was a career expatriate who knew that cash handed over to the local government would evaporate. The solution: Allow nuns to run the school. In Latin America, everyone could agree on the Catholic Church as honest, professional educators. The operator built a home for six sisters, including the principal, next to the school, and they ran the school honestly and with the children in mind. Unfortunately, the story has a sad ending.
Even with a successful partnership for several years, ultimately, the government became more unstable and failed to keep up its end of the agreement to both the clinic and the school. The health ministry stopped paying the medical staff and providing medical supplies, so the clinic closed.
The high school had become so successful that enrollment swelled far above capacity, so the nuns ran two shifts of students. Unfortunately, the government stopped paying the lay teachers, providing books and supplies, maintaining the school, and it also closed. The perfect “three-legged stool”—partnership for implementation and sustainability among industry, an honest-broker NGO, and a government ministry—failed.
There is certainly a lot of activity worldwide to develop infrastructure projects through public-private partnerships (PPP). In Europe and the US, PPPs are used to finance toll roads and privatize and redevelop utilities and water works. Investors put up the money in return for a share of the improved project’s revenue stream. This is an investment, not aid. In developing nations, PPPs are often funded by wealthy nations via the World Bank or regional development banks such as the Africa Development Bank. Projects include power, transportation/roads, telecom, water/sanitization, education, and primary health. World Bank-funded projects have been dominated by relatively low-risk countries: Brazil, China, India, Mexico, and Turkey. Oil companies often operate in far less developed countries, where the financial risk is simply too high for private investors and development banks. Yet, oil companies are usually required to include local development as a component of development projects.
I believe there is a great opportunity for us as an industry to partner more with governmental agencies and NGOs to make our community development projects more sustainable. What’s different about oil companies?
- We often operate in far needier countries with literally no infrastructure.
- We are committed to community investment as part of our concession or project agreements.
- We are not interested in a revenue stream or return. We have no profit motive from the infrastructure investment; we’ll make our money from production.
- We can execute the development project alongside our projects, taking advantage of our supply chain and contractors.
- We are there to stay for the life of the field or project: 20, 30, 40 years.
Oil companies are excellent at execution. We know how to manage projects, build facilities, and drill wells. We have extensive supply chains that allow us to import goods into far-flung countries. NGOs have their special strengths with running clinics or schools, providing front-line medical care and training local staff. But they often struggle with logistics such as importing specialized material into countries and building facilities. Governments and ministries are often cash-short and fail to follow through with staffing, maintenance, and consumables such as medical supplies and books.
In researching this article, I encountered a whole world of governmental and academic research on sustainable development in emerging economies. For example, I suggest you read about economic history and development in the writings of Douglass C. North, winner of the 1993 Nobel Prize in economic sciences. Of special interest is Violence and Social Orders (2009), in which he explains two types of social orders—“natural” states and open-access or modern societies.
Also, I met with Andrew Natsios, former administrator of USAID, and now at Texas A&M University and a world-known expert in international development. Issues with oil company local development and government-driven development programs are strikingly similar. Natsios’ article, “Nine Principles of Reconstruction and Development” (2005), echoes many of the main issues oil companies encounter when pursuing local development projects and helping to create sustainable communities:
- Ownership. The community must “own” the project.
- Capacity building. Transfer of technical ability to deliver.
- Sustainability. Design projects so their impact endures.
- Selectivity. Target investment where interests align.
- Assessment. Design for local conditions.
- Results. Have an objective before starting.
- Partnership. Collaborate with government, communities, private sector, NGOs, etc.
- Flexibility. Adjust as needed.]
- Accountability. Design accountability and transparency into the project and guard against corruption.
Sound familiar? Efforts to coordinate private industry, local development, and governmental agency links are out there: the Shared Value Initiative, Business for Social Responsibility, and the Niger Delta Partnership Initiative. Private industry (including oil companies) is doing more to improve on the nine principles, most especially ownership and sustainability, so that the impact lives on. In fact, an excellent example is the “Green Revolution” of the mid-20th century, in which modern plant hybrids and agricultural methods are credited with saving the lives of a billion people from starvation around the world, chiefly in Mexico, Pakistan, and India. Norman Borlaug, 1970 Nobel Peace Prize winner, is credited as the “Father of the Green Revolution.” It’s worth a quick Internet search to learn more.
Fundamentally, oil company operators and development organizations both work on a long-term, 20+ year development window. Politically motivated development can look for a quick fix, while sustainable societal change may take a generation. When oil companies enter a region, we are almost always in it for the long haul—to develop and produce a long-term asset, develop local staff to run it, and improve the lives of both the immediate communities and the overall country’s economy.
We all want a better world. Oil companies are already partnering with countries for the long term. Industry and governments can work together to create real, sustainable improvements in communities and countries where we operate. But, of course, we can be more successful if we have other organizations partner with us to create sustainable communities. My example of the programs in Latin America demonstrates what happens when one link in the chain fails. We can do better; we achieve greater reward when we work together for a common cause.
For Further Reading
North, D.C., Wallis, J.J., and Weingast, B.R. 2009. Violence and Social Orders. Cambridge University Press.
Natsios, A. 2005. Nine Principles of Reconstruction and Development. Strategic Studies Institute. Parameters, autumn issue (accessed 27 February 2017).
Joining Forces for Sustainable Communities
Janeen Judah, 2017 SPE President
01 April 2017
The Industry of the Future: What Does It Look Like?
A look at how policy, future workforce perception, and industry standards will shape energy companies in the near and distant future.
Accidental Discovery: Bitumen Pellets for Heavy Oil Transport
Researchers at the University of Calgary have developed a solid pellet that can transport bitumen and heavy oil by railcar instead of pipelines.
Opening Session Tackles Economic and Environmental Sustainability
SPE’s annual meeting opened Monday morning with a look at the economic and environmental sustainability of the oil and gas industry.
Don't miss out on the latest technology delivered to your email weekly. Sign up for the JPT newsletter. If you are not logged in, you will receive a confirmation email that you will need to click on to confirm you want to receive the newsletter.
12 June 2018