Shell: The Anatomy of Corruption

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Corruption is an English word. Yet, with the world’s predominantly negative perception of Africa, it is easy to believe corrupt practices originate from the continent. While Africa has had her fair share of this ill, the rest of the world, particularly the west, is also not immune to corruption. Just as we have corrupt people and organizations in Africa, they also have theirs in the developed economies. The only difference is that the political system in the developed world has made significant progress in protecting the general populace from the hazards caused by corrupt people and organizations. Yet, we often find corrupt organizations from the developed world perpetuating corruption in Africa, far away from their home country. One of such organizations is Shell.

A String of Indictments

Shell is a long-standing international giant with a huge global reputation, with total annual revenue of 344.88 billion U.S. dollars in 2020, almost 77 percent of Nigeria’s GDP of 448.10 billion U.S. dollars. In Nigeria, Shell’s influence towers above that of all other companies and many see them as a bully. The company wields considerable influence over the Nigerian government and even its banking industry. However,  Shell is currently battling a negative image in Nigeria and increasing loss of reputation on the international stage

The oldest International Oil Company (IOC) in Nigeria, Shell has contributed immensely to the Nigerian economy through its large oil output but has also been at the centre of controversies in the country on various issues bothering on pollution and corruption. Easily Nigeria’s largest producer, accounting for more than 21 per cent of Nigeria’s total petroleum production at 629,000 barrels per day from more than eighty fields. In February, the British Supreme Court declared that Nigerians can sue the oil giant in the United Kingdom for damages to their lands, barely a week after a court in the Netherlands compelled it to compensate Nigerian farmers for damages over 2004/2005 oil leaks.

In November 2013, Amnesty International said it had uncovered proof that Shell conceals the amount of oil it spills in Nigeria’s Niger Delta region. Shell maintains most of the oil it loses is due to theft, not to slipshod operations and management.

In December 2020, Dutch television documentary programme Zembla, together with Dutch environmentalist organisation Milieudefensie, reported in a documentary that “multiple witnesses declared that SPDC staff, had deliberately caused oil leaks to make money from subsequent clean-up initiatives. The findings of the Dutch activists were unveiled in an article on Aljazeera.

According to sources, Shell employees profit from these intentional oil leaks by pocketing money from clean up budgets,” Zembla said in a press release summarising an 18-month investigation of various leaks between 2010 and the present day.

Zembla added the SPDC, along with the Dutch embassy in Nigeria, were aware of the accusations but had failed to address them.

Shell has also admitted to its own inconsistencies in the past. In 2004, Bloomberg announced in a report that the international oil giant announced that it had overestimated the size of its “proved” oil and gas reserves by an astounding 20%.

There is also the Malabu scandal, in which senior executives from Shell and Italian-based energy giant, Eni, were charged for the illegal and corrupt acquisition of one of Nigeria’s largest oil blocks, Oil Prospecting Lease (OPL) 245.

An Italian court in March 2021, acquitted energy giants, Eni and Shell of $1.1-billion corruption charges related to an oil exploration deal in Nigeria in the biggest corruption scandal in the industry. The long-running case concerns the 2011 purchase by Eni and Shell of OPL 245, a giant offshore oilfield in Nigeria estimated to hold nine billion barrels of crude.

Oil Block Controversies

In what has now been described as an outright fraud by Civil Society Organizations, Shell allegedly resold part of an Oil Mining Lease which it had already sold to indigenous oil giant, Aiteo.  The company had accused Shell of selling two Marginal Fields – Kugbo West and Okiori to it when it, “knew or ought to have known that the defendant had handed over the wells to the federal government of Nigeria\Nigerian National Petroleum Corporation (NNPC) for which the defendant received valuable consideration in or about 2009 prior to the agreement for assignment.

Shell and its joint venture partners sold all their undivided 45% equity in OML 29 to AITEO sometime in 2014 for a whopping sum of $2.4 billion, which assets Shell said included the Nembe Creek Trunk Line and the Marginal Oil Fields among others.

In the suit filed at the Federal High court Registry on July, 27, 2021, the plaintiff claimed that Defendant, Shell which was the operator of the OML called for bids for the undivided 45% interest which it held with its partners Total and AGIP.

In the agreement signed at the sale of the facility, Shell listed oil wells in the OML to include Kugbo West 1-4 and Okiori Nos. 93-94 and further warranted that all statements and claims in the agreement are true and factual and that the oil wells were part of what were transferred to AITEO and were not encumbered in any way as no third party had any right to interfere in their operations and ownership of the oil wells.

However, despite all these claims made by Shell, sometime in 2020, AITEO upon its intention to commence work at the wells found out that they had earlier been re-conveyed back to NNPC by Shell without informing AITEO and still went ahead to sell what did not belong to it to AITEO and knowing that the well no longer belonged to it. While Shell sold OML 29 with the oil wells to AITEO in 2014, it had in 2009 re-conveyed the oil wells to NNPC.

Shell has also now awarded those oil wells to another company which has also paid for it thereby exposing the fact that Shell did not truly own the oil wells which it purportedly sold to AITEO.

Meanwhile, some CSOs have expressed displeasure at the alleged fraud perpetrated by Shell against Aiteo but commended Aiteo for not resorting to self-help. The group said since the issue has been brought before the court of law, the judiciary arm of government should give the matter the needed expedited action.

Also, the Nigerian Ethnic Youth Leaders Council (NEYLC), commended Aiteo for taking the legal option. The council, which is made up of the Arewa Consultative Youth Movement, Ohanaeze Ndigbo Youth Movement, Oduduwa Youths and Middle Belt Youths, note that it’s commendable that Aiteo took the legal route to right the wrong. A statement by its Head of Coalition’s Secretariat, Nwada Ike Chiamaka, said it was wrong for Shell to have perpetrated the fraud at the first instance. It expressed the conviction that Aiteo will get justice at the court and get back what rightly belongs to it.

It will be recalled that AITEO had earlier filed another Suit against Shell saying that it claims that the Nembe Creek Trunk Line which it also sold to AITEO in the same transaction was recently refurbished but upon full acquisition, the company noticed that the Trunk Line was in a dilapidated stated with multiple leakages thereby causing AITEO huge losses which it asked the Court to award compensations for.

The Missing Barrels

There seems to be no limit to Shell’s corrupt activities in Nigeria as more can of worms kept being uncovered.  Shell has also been fingered in cases where several crude oil barrels accruing to local partners injecting into its facilities are allegedly shortchanged. Today’s Echo has gathered from reliable sources that complaints by Local Oil Companies (LOCs), led to an investigation by the Department of Petroleum Resources (DPR), culminating in the regulatory agency releasing a report noting some irregularity in the methodology used by the IOC.

Earlier in the year, Aiteo, had sued Shell for about 4 billion dollars in damages. Aiteo is accusing Shell of deliberately underreporting the quantity of crude being injected into the Bonny terminal through the use of unapproved measuring equipment, amongst other charges.

Shell’s alleged manipulation has led to an alleged loss of over 16 million barrels of crude to Shell from oil injected into Shell’s Bonny Terminal from Aiteo’s Oil Mining Lease (OML) 29 which it originally purchased from Shell.

In response to Aiteo’s lawsuit against Shell, the court has issued a Mareva order directing 20 commercial banks to place restrictions on Shell accounts to the tune of the cash value of more than 16 million barrels of crude pending the hearing and final determination of the case.

In the statement of claim with suit number FHC/L/CS/52/2021, filed before Justice O.O Oguntoyinbo of the Federal High Court, Lagos, against Shell Petroleum Development Company (SPDC); its mother company, Royal Dutch Shell plc; and three other subsidiaries, Aiteo is accusing Shell of deliberately underreporting the quantity of crude being injected into the Bonny terminal through the use of unapproved measuring equipment, amongst other charges.

Aiteo also argues that because the OML with its attendant production and evacuation infrastructure was over 35 years old, (even though the Defendant fraudulently or wrongfully misrepresented to the plaintiff that it was reconstructed in 2010) the crude oil output contained a significantly higher level of water than the desirable, thereby creating a shortfall in the volume of actual crude oil that arrived at the bonny terminal.

Therefore, Aiteo is seeking in addition to, or as alternative to other compensations highlighted in the statement of claim, a sum of 4 billion US dollars arising from misrepresentation of the SPDC and other defendants to Aiteo regarding the NCTL pipeline infrastructures.

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