Babafemi O Oyewole talks to Oil Review Africa

The association acknowledged that APPA would require a substantial fund to achieve its ambitious mandate and set up the APPA Fund for Technical Co-operation. Babafemi O Oyewole is the Fund’s executive director and chief executive and profiled the association’s activities in an exclusive interview for Oil Review Africa with Stephen Williams.

APPA was created to adopt a common platform for oil and gas policy initiatives and development strategies. It promotes common policy initiatives covering all facets of Africa’s petroleum industry, and seeks to maximise the industry’s ability to promote Africa’s development trajectory through petroleum exploitation,

Currently comprising of 16 member countries, namely: Algeria, Angola, Benin, Cameroon, Chad, DR Congo, Congo, Côte d’Ivoire, Egypt, Gabon, Equatorial Guinea, South Africa, Libya, Mauritania, Nigeria and Sudan, these countries account for much of Africa’s oil and gas reserves and production.

But the association’s vision does not just end there, as Babfemi O Oyewole, the APPA Fund’s chief executive explained to Oil Review Africa. APPA is actively committed to seeking co-operation not just within but also outside the African continent.

“We promote the development of the oil and gas sector in Africa by providing a unified voice,” Oyewole told ORA. “We must also be able to negotiate and protect Africa’s interests within the world’s oil and gas industry. Some of our members also belong to OPEC and are able to push forward the African voice within that organization – indeed, that was one of the main initial policy objectives – but APPA’s role has since been expanded.”

Initially, the APPA initiative was formulated by Nigeria, Algeria and Egypt, but it quickly grew its membership to represent 16 oil producing countries in Africa.

It was decided that African oil producers should come together with the non-producers to form the African Petroleum Fund. Its purpose was to both develop production and exploration in the producing countries as well as to assist the non-producers.

“The African Petroleum Fund was created to counter the effect of the high oil prices on the economies of oil importing countries in Africa, that is non-producers,” Oyewole says, adding that the surge in the oil price “seriously affected their balance of payment positions. It was thought that the African producers should be able to alleviate the shock of the high oil price on the non-producers economies.”

The Fund was originally conceived of as being the responsibility of the producers to contribute to. But, after some discussion, it was decided that it was not just oil producers that had the resources to contribute. Some non oil producing African countries possess raw materials like precious metals, diamonds and other mineral wealth that they export, earning considerable revenues. So APPA’s fund, was expanded to include all African countries, and producers and non-producers alike were invited, through the African Union, to contribute on a voluntary basis.

When I asked the chief executive whether the contributions were confidential he told me that because they originated contribution not only from the member countries but many of the IOCs were willing to contribute to the Fund through national governments, the picture is complicated.

Raising the bar

Oyewole also confirmed that that the development finance institutions had also been approached. The target was initially to raise US$500mn, but it has been proposed by some members that it should now been raised to US$1 billion “It is going to be used to promote joint ventures, to promote regional projects, invest in equity positions in some regional projects, and in partnership with both international and national oil companies.”

One interesting proposal is to increase Africa’s capabilities to reduce the asymmetry of knowledge and information, to help with negotiation and properly value their resources. “One of the key objectives of APPA is to harmonise oil industry policies among member countries,” Oyewole says. “One area that we are focusing on now is hire consultants to investigate existing oil and gas contracts that member countries have entered into.”

The idea behind this initiative is to standardise future oil and gas contracts. “The objective is to come up with a contract template to assist our member countries to negotiate, basically so that we can provide a benchmark for contracts across Africa. We believe that this is one of the things we can do that will enhance the capacity of countries to negotiate equitable contracts. Basically, we realised that we were at a disadvantageous position in negotiating contracts with the international oil companies.”

A Nigerian and with a background is economics, as well as development and commercial banking, Oyewole studied in his native Nigeria before undertaking a PhD in the UK in Development Finance at the University of Bradford and completing a certificate programme at the the John Kennedy School at Harvard University in the US.

It seemed appropriate to ask him what his opinion was of a suggestion by Nigeria’s Minister of Finance Olusegun Aganga and the Securities and Exchange Commission’s director general Arunmah Oteh that the oil industry’s Nigerian joint ventures should be encouraged to list on the Nigeria’s stock exchange as a way of increasing local content and local involvement.

“The oil sector is a very strategic sector and the impact of the sector can be leveraged in terms of providing employment opportunities and in terms of development,” Oyewole pointed out. “A agree, one of the ways that I think they can also be made to contribute to development is by being listed on the local stock exchange. Then, I believe, the Nigerian public would be able to share in the oil industry’s profits and that will increase income levels and consumption, etc.

“What we must do is to create an appropriate environment, keep incentives that will make them willing to list. Most of the international oil companies with Nigerian operations are listed in their own countries, so it does seem reasonable that they should list in Nigeria.”

But Oyewole is also realistic enough to see that some oil companies might be reluctant to open their books for scrutiny. “I am not sure they would all agree to that because, as you know, in the oil sector there are lots of things that are very opaque. Even with the country’s output, no one actually knows what the actual production is in Nigeria because of the issue of stolen crude. But I think that our former president, the late Umaru Musa Yar’Adua, was absolutely right when he commented that if we are going to talk about blood diamonds, stolen crude should also be similarly be considered as ‘blood crude’, and the international community must be urged to boycott this output.”

Stephen Williams