Nigeria Will Lose $6 Billion In ‘Corrupt’ Oil Deal With Shell And Eni

Nigeria Will Lose $6 Billion In 'Corrupt' Oil Deal With Shell And Eni
Foreign oil companies are raping Nigeria.

AFRICANGLOBE – A deal Shell and Eni brokered with the Nigerian government in 2011 is set to cost the African nation $6 billion in lost revenue, a report claimed Monday.

The report, published by campaign group Global Witness, said the allegedly corrupt deal’s terms would stop Nigeria accessing its share of the profits from oil extracted from its offshore block.

Shell and Eni were accused of bribery last year over a $1.3 billion payment that secured an exploration licence for the block, known as OPL 245, in 2011. It was alleged that although the funds were paid to the Nigerian government, the money actually went to Malabu Oil and Gas — a company linked to former oil minister Dan Etete.

Global Witness claimed that a term granting Nigeria a share of the oil production profits was negotiated out of the 2011 deal by former Nigerian ministers, who it alleges took bribes from the oil giants. It said the clause was replaced with a back-in option that required Nigeria to pay more towards the exploration costs than it could afford.

Shell and Eni — along with some of their former employees — are facing charges relating to the payment, with Italian prosecutors alleging there was awareness the funds would be pocketed by individuals. All of the defendants have denied any wrongdoing.

‘No Case Against Shell’

In a statement, a Shell spokesperson said: “Since this matter is before the Tribunal of Milan it would not be appropriate for us to comment in detail. We maintain that the settlement was a fully legal transaction with the federal government of Nigeria and Eni and, based on our review of the prosecutor of Milan’s file and all of the information and facts available to us, we do not believe that there is a basis to convict Shell or any of its former employees.”

Shell’s Executive Vice President Frans Everts wrote to Global Witness ahead of the report’s publication to reiterate the company’s position. In the letter, Everts questioned the methods used in Global Witness’ research.

“We dispute your characterization of the facts, your allegations of criminality and the legal conclusions you reach,” he said.

“The statements in your letter are based on faulty methodologies which do not meet adequate qualitative standards. They fail to take into account elements that are typically used by the industry… misconstrue the terms of the 2011 settlement and even reference legislation which has not been passed.”

Nigeria’s Back-In Right

Eni agreed with Shell’s position, a spokesperson claimed Global Witness’ analysis may have overlooked the Nigerian government’s 50 percent back-in right on the oil block.

“This fact alone would make the analysis groundless,” the spokesperson said.

The company also noted that Global Witness and its partners had made two requests to be admitted in the court proceedings as aggrieved parties, but those requests had been rejected.

“We wish to confirm the correctness and compliance of every aspect of the transaction in respect of OPL 245 concluded in 2011, both with applicable laws and global industry practice,” the spokesperson said. “Eni reaffirms that it signed a commercial agreement in 2011 for a new license for OPL 245 with the federal government of Nigeria and the Nigerian National Petroleum Company, and the consideration for the license was paid directly to the Nigerian government.”

A Global Witness spokesperson said that Nigeria’s back-in right had been considered, but the group felt it was irrelevant because the government would have to pay billions of dollars to retrieve its share of the profits.

“For the government to back in they would have to pay a share of the $10.8 billion costs, something substantially beyond their means,” they said. “This is the main reason Nigeria shifted in the 1990s to a system of production sharing contracts, where they receive a share of production without paying for the costs. It’s this share of production that was taken away from Nigeria in this deal.”

Earlier this year, research showed Nigeria had overtaken India as the nation with the highest concentration of extreme poverty — despite being an oil rich nation and one of Africa’s wealthiest economies.

Shell and Eni still hold the exploration licence for OPL 245.

A spokesperson for the federal government of Nigeria was unavailable for comment when contacted.

 

By: Chloe Taylor