Oil giants, Eni and Shell paid $1.1 billion to government officials to give away Nigeria’s share of oil returns from Oil Prospecting Lease (OPL) 245, in what is now known as Malabu scandal, Today’s Echo has gathered.
“Italian Prosecutors allege that the $1.1bn paid by Shell and Eni for the OPL 245 licence was used to pay former Nigerian oil minister Dan Etete and “intended for payment to President Jonathan, members of the government, and other Nigerian public officials”. Shell, Eni and some of their senior managers are now standing trial, charged with international corruption, with prosecution pending in other countries,” Global Witness, an international organization working to expose the systems that enable corruption and conflict stated in a press release issued on Thursday, April 25, 2019.
Malabu and the OPL 245 deal
In 2011, Shell and the Italian oil company Eni paid $1.1 billion in a murky deal for an oil block located off the coast of Nigeria: OPL 245. However, there are documents showing that this money didn’t go to benefit the Nigerian people.
“Instead it went to convicted money launderer and former oil Minister, Dan Etete, who had awarded himself ownership of the block in 1998 via a company he secretly owned, Malabu Oil and Gas, ” Global Witness says in a report.
After six years of denying any wrongdoing, Global Witness’ investigation forced Shell to admit it knew the money would be diverted into private hands, and went ahead with the deal anyway.
The landmark trial, which began hearing evidence in Milan in September 2018, involves current and former senior staff from two of the world’s largest corporations. They include Eni’s current CEO Claudio Descalzi, and former Royal Dutch Shell Executive Director for Upstream, Malcolm Brinded CBE.
The case brought by the Milan Public Prosecutor alleges that $520 million from the deal was converted into cash and intended to be paid to then Nigerian President Goodluck Jonathan and other Nigerian government officials. The prosecutors further allege that money was also channelled to Eni and Shell executives, with $50 million in cash delivered to the home of Eni’s then head of African Operations Roberto Casula.
Today’s Echo found out from Global Witness representative, Barnaby Pace, who has been monitoring the trials at the Milan Palace of Justice, that new analysis finds Shell and Eni would not pay $1.1bn upfront for Nigeria’s OPL 245 oil field until Nigerian Government officials agreed to give away their rightful share of oil. The $1.1bn is alleged to have funded a vast bribery scheme.
The analysis of Shell and Eni’s valuation documents prepared before they agreed the deal in 2011 appears to show that the transfer of Nigeria’s share of future revenue to the companies was essential for the companies to be willing to pay over a billion dollars upfront, money that prosecutors say was used to pay massive bribes.
The analysis also found that the Nigerian state’s ability to buy their rights back was heavily restricted in the deal with Nigeria having to pay $650m plus interest up front to re-acquire a stake worth an estimated $2 billion in future revenue. These rights would still leave Nigeria with a far lower share of the oil production than recommended by the IMF, and 15% or $3.5bn lower than previous terms for the same license.
Our new analysis finds Shell and Eni would not pay $1.1bn upfront for Nigeria’s OPL 245 oil field until Nigerian Government officials agreed to give away their rightful share of oil. The $1.1bn is alleged to have funded a vast bribery scheme. Press release https://t.co/OMzRrWYZUm pic.twitter.com/x0k97UzsfF— Barnaby Pace (@pace_nik) April 25, 2019
Last week, A Nigerian court ordered the arrest of two people connected with the deal; Dan Etete, former Petroleum Minister and CEO of Malabu oils, and Mohammed Adoke, former Attorney-General of the Federation under President Goodluck Jonathan.
International oil giants, and most especially, Shell, have had a sordid history in Nigeria
Last year, Today’s Echo reported that Shell has set aside the industry competitive bidding process it pioneered and has entered private negotiations with Heirs Holding, a company founded by business Tycoon and former CEO of the United Bank for Africa, Tony Elumelu, for Oil Mining Licenses 11 and 17 in the onshore Niger Delta for a reported $2 billion. Included in the sale are national infrastructure assets such as a natural gas-fired power plant that would be managed by Transnational Corporation of Nigeria Plc, another company run by Elumelu.
Analysts are worried that Shell may be setting itself up for another Malabu scandal if it fails to open its business deals in Nigeria to public scrutiny.