US embassy cable - 04LAGOS1564

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 001564 
 
SIPDIS 
 
E.O. 12958: 07/26/14 
TAGS: EPET, ELAB, ECON, PGOV, NI, ASlC 
SUBJECT: A SUCCESSFUL MODEL FOR MANAGING OIL IN 
NIGERIA 
 
1.(U) Classified by CG Brian Browne for reason 1.4(d) 
 
2. (U) SUMMARY. In a July 22 meeting with Ambassador 
John Campbell, Ocean Energy Managing Director Raymond 
Marchand stated that the Nigerian National Petroleum 
Corporation (NNPC) contracting process was protracted 
and involved many duplicative steps but was not 
corrupt. Marchand related that the chronic violence 
in the Delta did not affect Ocean Energy's 
operations, which focus on deep-water oil patches. He 
was proud that Ocean Energy also was at the forefront 
among oil companies in hiring Nigerians to important 
positions (i.e., local content) and in funding 
community development projects (CDAs). END SUMMARY. 
 
3. (U) Ambassador John Campbell met with Raymond 
Marchand, Managing Director of Ocean Energy, in Lagos 
on July 22, 2004. CG Brian Browne, Ocean Energy 
Drilling Manager David Halloway, and ConOff Bill 
Murad (notetaker) also attended. Ocean Energy is the 
international arm of the American firm, Devon Energy 
Corporation. 
 
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SECURITY 
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4. (U) When asked for his approach to security risks 
and outbreaks of violence in oil-producing areas, 
Marchand explained that Ocean Energy's risks were 
minimized by the fact that its focus was on deep- 
water drilling, 100 miles out to sea. Headquartered 
in Lagos, Ocean Energy further minimized its risks by 
maintaining only a skeletal, two-person office near 
Port Harcourt. Marchand added that, even under the 
most dangerous conditions, "business always 
continues," and that, for Nigeria to be successful, 
"everyone knows that the oil business must go on." 
 
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RED TAPE 
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5. (C) Asked about corruption in the oil contracting 
process, Marchand said the Nigerian system was more 
cumbersome than corrupt. In fact, Marchand asserted 
the system, which involves a series of decisional 
reviews as an item moves up the NNPC hierarchy, was 
created to check corruption. The truth is that the 
Nigerians do not trust each other and closely vet the 
decisions of other parts of the NNPC bureaucracy. 
Ocean Energy succeeds by hiring former civil servants 
and experienced private-sector Nigerians who know the 
system well. For example, Ocean Energy recently 
navigated the National Petroleum Investment 
Management Services (NAPIM) approval process in 13 
months instead of the customary 18-24 months needed 
to approve the drilling of a well. Marchand credits a 
culturally savvy staff, led by a former NAPIM 
minister, with reducing Ocean Energy's waiting 
period. He mentioned that the current NNPC Managing 
Director, Engineer Funsho Kupolukun, was much better 
than his predecessor, Jackson Gaius-Obaseki. Obaseki 
was self-absorbed and paid insufficient attention to 
the internal workings of the NNPC. Kupolukun, on the 
other hand, is well-versed, involved, and has made 
the NNPC perform more efficiently, though many 
bottlenecks still remain. He said that other oil 
companies often hurt themselves by grousing and 
attempting to push the Nigerians to change their 
system. This will only make the process more 
dilatory, he stated. 
 
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COMMUNITY INVOLVEMENT 
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6. (U) Marchand explained Ocean Energy's successful 
approach to local content and community development. 
While law requires 50% local content, approximately 
75% of Ocean Energy personnel are Nigerian. The 
company's drilling team is composed entirely of 
Nigerians except for four x-pat managers who rotate 
in pairs every four weeks. The entire team of 
seismologists who decide where to drill is Nigerian. 
Further, Ocean Energy spends up to $2 million per 
year in local training and CDPs despite the fact that 
they are not yet producing (Oil companies are 
required to fund CDPs but only after actual 
production). Ocean Energy' community involvmnt is 
even more remarkable given that its deep-water focus 
makes it less vulnerable to local unrest. 
 
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COMMENT 
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7. (U) COMMENT. Ocean Energy's model of working 
within the Nigerian system, using a largely Nigerian 
staff, and concentrating on deep-sea drilling has 
been successful. While other companies that operate 
closer to shore may not be able to share Ocean 
Energy's sense of relief on security isues, they 
perhaps can take a lesson from Marchand and his crew 
on how to navigate the NNPC bureaucracy. END COMMENT. 
 
BROWNE