PIA: Mobil fails to incorporate HCDT in Akwa Ibom six months after deadline
By Ekemini Simon
SIX months after the deadline for the incorporation of the Host Communities’ Development Trust (HCDT), Mobil Producing Nigeria Unlimited, a major oil company in Nigeria operating in Akwa Ibom State is yet to incorporate the Trust, thus denying communities its statutory social and economic benefits.
Background to Host Community Development Trust /Deadline
The Petroleum Industry Act (PIA) (2021) assented to by President Muhammadu Buhari on August 16, 2021, provided for the incorporation of Host Community Development Trust (HCDT) in oil and gas-producing communities.
According to the PIA, the Trust is aimed at fostering sustainable prosperity in the host communities, providing direct social and economic benefits from petroleum operations to the host communities, among other benefits.
Section 240 (2) of the Act provides that oil/gas companies are mandated to make an annual contribution to the Host Community Development Trust Fund of an amount equal to three per cent of the company’s actual annual operating expenditure of the preceding financial year.
Interestingly, Section 236 of the Act gives a time frame for the incorporation of the Trust as within 12 months from the time the law came into force. This implies that since the PIA became effective on August 16, 2021, the Trust is expected to be incorporated on or before August 15, 2022.
However, this has not been the case for the host communities of Mobil Producing Nigeria Unlimited in Akwa Ibom State.
Mobil’s last-minute scramble drags incorporation of HCDT beyond deadline
Investigations reveal that Mobil Producing Nigeria Unlimited has yet to incorporate the Host Community Development Trust into its communities.
Mobil Producing Nigeria Unlimited operates four Oil Mining Leases (OMLs); OML 104, 67, 68 and 70. These are producing conventional oil fields located in the shallow waters of Akwa Ibom state territory. However, it has not kept to the 12 months deadline provided for by the PIA for the incorporation of the Trust.
Findings indicate that the oil company started the process at the eleventh hour. Documents and information accessed show that the company commenced the process of incorporation in July 2022 (11 months after the Act was signed into law).
The delay has only made the company execute preliminary demands for community mapping provided for by Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for the setting up of the Trust in its communities.
Information from credible sources from Mobil, the communities and government officials reveal that Mobil had identified eight coastal communities of Ibeno, Eket, Onna, Esit Eket, Mbo, Eastern Obolo, Mkpat Enin and Ikot Abasi as host communities of its four assets.
However, credible information at our disposal has it that Ibeno had rejected being part of one Trust Fund that has all the eight local government areas on the grounds of being the host community of Mobil’s operational base coupled with concerns of being a minority within a Trust that will have local government areas which will be dominated by Ibibio communities, a major ethnic group in the State.
Although the Paramount Ruler of Ibeno,Owong Effiong Archianga had been unreachable during the period of this investigation even as the Council Chairman, Williams Mkpah had failed to keep to several interview appointments.
The Village Head of Inuaeyet Ikot, Ikot Bassey Essien – one of the villages that host Mobil terminal confirmed to The ICIR that Mobil Producing Nigeria Unlimited began engaging Ibeno on the Host Communities’ Development Trust in July 2022.
He told The ICIR that Ibeno had sent five nominees for the Board of Trustees.
Other credible stakeholders from Ibeno who refused name on print told The ICIR that Mobil had gone further to contract a Lagos-based consultant, Petrohauk Centrum limited to conduct a need assessment for the Trust which they said was concluded in January 2023.
The ICIR was also reliably informed that Ibeno had concluded their host community development plans and sent them to Mobil awaiting further approvals by the NUPRC and the formal registration of the Trust at the Corporate Affairs Commission (CAC).
It is unclear whether final approval of the Trust has recently been given by NUPRC and if it has been registered by the CAC as of the time of filing this report.
Fund matrix shrouded in secrecy
The communities told The ICIR that among the preliminary demands, the fund matrix for the Trust has been unclear.
The communities within the planned Trust also informed The ICIR that they are not able to access data on what was the operating cost of Mobil in 2021 and 2022 which would have helped them understand the fund matrix for the trust.
As highlighted earlier, the PIA has provided that the company is mandated to pay an amount equal to three per cent of the company’s actual annual operating expenditure of the preceding financial year.
The ICIR could only access Mobil’s parent company’s (ExxonMobil) 2021 and 2022 financial reports but could not see the annual operating expenditure for its operations in Nigeria.
Through, a freedom of Information (FOI) request information was sought from Mobil, NURPC and CAC but they were not acceded to.
Sections 417 – 424 of the Companies and Allied Matters Act, 2020, provides for every company to make and deliver their annual returns to the CAC annually. Annual returns contain information on operating expenditures for companies.
Separate trust for Ibeno, a recipe for crisis
Findings reveal that the regulator, NUPRC has approved Ibeno local government area to have a Trust different from the other seven local government areas.
However, most of the leaders from other local government areas within the host communities of Mobil Producing Nigeria Unlimited have expressed displeasure on why what they described as preferential treatment should be given to Ibeno to have a different Trust from theirs.
Most of the leaders spoken with from other local government areas within the Trust insists that if the fund matrix favours Ibeno above each of the other local government areas, they will also demand they be given a separate Trust.
One of the leaders, Bassey Dan-Abia, a Former House of Representatives Member, nominated by the Council Chairman of Esit Eket, Iniobong Robson, to speak on issues of the Host Communities’Development Trust as it concerns Esit Eket said ” Without consultation with the proposed eight local government areas (Communities), Mobil had to set up a separate Trust for Ibeno. Up till now, no reason has been given for that.”
Abia, who is also the Board of Trustees nominee for Esit Eket in Mobil’s HCDT noted that Mobil only came up to claim that NUPRC instructed them to increase the number of the Board members to nine after Ibeno were provided with a separate Trust. He said the addition meant that five local governments had a nominee each, while Eket and Eastern Obolo had two each to make nine in total. He insists that the provision of a separate Trust for Ibeno is a decision that may further prolong the implementation of the Trust whenever it is incorporated, stressing that it is a recipe for crisis and litigation.
Yet, a Chairman of one of the Council who refused name on print claimed that the separate approval for Ibeno is a deliberate strategy designed by the settlor (Mobil) to cause disharmony within the region.
“The oil companies, just like colonial masters, have always had a history of causing a divide and rule tendency so that brothers will fight and attention divided so they continue to exploit us without the notice of all of us all. This is the situation in the separate Trust provided for Ibeno”, the Council Chairman said.
Mobil insists on non-disclosure of information on the Trust
Through a Freedom of Information request, sent via TheMail newspaper has Mobil for information and documents relevant to this investigation such as the Identity of the host Communities of Mobil Producing Nigeria Unlimited in Akwa Ibom State, Documents of Incorporation of the Trust which includes evidence of consultation with communities including date of consultation commencement, actual amount due for the Trust in Akwa Ibom State in 2021 and 2022, names of members of the Board of Trustees, Management Committee, and Advisory Committee, Evidence of application to register the Trust with Corporate Affairs Commission and Name of the Trust.
Other requested information included the company’s 2021 and 2022 Annual Returns filed at the Corporate Affairs Commission.
However, the company did not accede to the request. The Manager, Media and Communications of Mobil Producing Nigeria Unlimited, Oge Udeagha in a reply dated February 13, 2023, said that the company is not subject to the FOI and hence will not honour the request.
TheMail in a response on the same date, insisted that the request is in line with what the FoI provides for public record or document, is in public interest and also provides Mobil the opportunity for a fair hearing.
Mobil, in another reply, stressed that they stand by their earlier stance not to honour the request.
Yet, the newspaper went further to contact the company outside the FOI. The Manager, Media and Communications was contacted on phone on pertinent questions about the incorporation of the Trust, he requested the questions be sent through an mail for attention.
The information requested information on the effort and progress made on the incorporation of the Trust, when the process of engagement with the communities began, the local government areas that are the host communities for each of the four OMLs operated by Mobil.
Other information asked were where the host communities will access Mobil’s data on the annual operating expenditure for each of the four OMLs and what will be the actual amount paid to the communities as operating expenditure for 2021 and 2022 fiscal year of the company, if they had kept to the 12 months deadline as provided for in the PIA and the Regulations for the incorporation of the Trust, If not, what the reasons for the delay are.
It was also asked if it was true that Petrohauk Centrum Limited based in Lagos was contracted for need assessment and why the Mobil preferred the company against local content preference. The list of bidders for the need assessment contract was further requested.
In response, Mobil noted, ” We will not be providing any comment at this time.”
Mobil, NUPRC Culpable
Mobil Producing Nigeria Unlimited is culpable for not adhering to the time-frame for the incorporation of the Trust as provided for in Section 236 of the PIA.
For existing oil mining leases and existing designated facilities, the section requires the Trust to be incorporated within 12 months from the effective date of the Act which was August 16, 2021.
Interestingly, the regulator (NUPRC) has also been found wanting. The failure to incorporate the Trust is a breach of the PIA and brings dire consequences on the settlor according to Section 238 of the PIA and paragraph 9 of the Nigeria Upstream Petroleum Host Communities Development Regulations 2022 (the Regulation).
Section 238 of the PIA states that the failure to incorporate the Trust may be a ground for the revocation of the settlor’s licence after the settlor must have been informed of such failure by the Commission or the Authority as the case may be.
Yet, the NUPRC has a role to play before the sanctions. paragraph 9(1) of the Regulation provides that the Commission “may within 14 days issue such defaulting settlor or operator where applicable, a notice in writing of its failure to establish a trust and direct the settlor to register the trust within 45 days.” This implies from August 21, 2022, by law, the notice should have been sent out to Mobil Producing Nigeria Unlimited over its failure to incorporate the Trust.
If NUPRC had issued the notice on August 16, 2022, the 45 days period would have elapsed on October 10, 2022.
Interestingly, paragraph 9 (2) provides that where a settlor or operator fails to incorporate the Trust after the expiration of 45 days’ timeline contained in the Commission’s notice, the settlor or operator shall be liable to an administrative penalty of $2,500 or its Naira equivalent per day calculated from the date of expiration of the notice until the Trust in incorporated.
Paragraph 9 (3) further adds that the Commission has the option to make a recommendation to the Minister, for the revocation of the licence or lease of the defaulting settlor where the settlor fails to incorporate the Trust within 30 days after the expiration of the 45 days timeline.
An FOI request sent to the Chief Executive of the NUPRC, an Engineer, Gbenga Komolafe in Abuja, had requested information and documents about defaulting notice given to Mobil.
Although the Commission acknowledged the request on February 10, 2023, the Commission has not acceded to the request, thus raising suspicion that NUPRC has not generated the defaulting notice to the company.
A further visit was made to the Commission’s zonal office in Eket, Akwa Ibom state on February 22 and 28, 2023. The Human Resource Manager, Kingsley Ekuri who they directed the reporter to speak with was not on seat on both days. He also did not respond to calls and text messages sent to his phone line on the matter.
However, the late availability of all the relevant guides necessary for the incorporation of the Trust suggests that the Commission may not have taken the August 2022 deadline seriously.
The Nigeria Upstream Petroleum Host Communities Development Regulations 2022 was issued close to the deadline. It was issued on June 24, 2022 which is 58 days to the deadline. Leaders within Mobil’s host communities had told The ICIR that engagement with communities for the incorporation of the Trust began in July 2022, a month after the regulation had been published.
No justification for Mobil Breach of Deadline – Policy Alert Insists
A civil society organisation working to promote fiscal and ecological justice in the Niger Delta has said that there is no justification for Mobil Producing Nigeria Unlimited not to incorporate the Host Communities’ Development Trust within the timeframe prescribed by law.
Policy Alert’s Senior Programmes Officer, Mfon Gabriel insisted that with or without the Nigeria Upstream Petroleum Host Communities Development Regulations, Mobil should have incorporated the Trust especially as section 235 of the PIA has already granted the company the power to define who their host communities are.
He said by the insight and powers provided by the Act, Mobil should have commenced the process of engaging the communities they have determined as their host communities waiting for the regulation which he said can only shape the process already commenced.
Gabriel suggested that what may have preoccupied Mobil thus distracted them from commencing on time the process of incorporating the Trust must have been their effort to controversially divest their assets to Seplat.
The Senior Programme Officer who said NUPRC cannot be blamed for the late incorporation of the Trust and failure to recommend sanctions, noted, “The regulator would not be in a better position to know the companies that have not incorporated the trust because there are several assets that they are overseeing in the region.
“Someone needs to bring it to their attention. That is where the attention of the host communities and media comes in, specially to lay their complaints.
Hence, the communities should reach out to the regulators and escalate it when they don’t take action.
Gabriel recommended that the host communities should immediately engage the regulator and reach out to Mobil for the incorporation of the Trust not to be delayed further.
He pointed out that Mobil does not lose anything in delaying to establish the Trust, rather the communities will be shortchanged since very soon, their licences will expire, also the world is gradually transiting from fossil fuels to cleaner energy.
This report republished from The International Centre for Investigative Reporting (The ICIR) is supported by Connected Development in partnership with Oxfam Nigeria on the Power of Voices Partnership FAIR for All project