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Shell, Eni paid $1.1bn for Nigerian oil block – US court

By Uduma Kalu, with agency report
LAGOS — A controversial $1.1 billion oil deal involving Shell and ENI in Nigeria has renewed concerns about transparency in Nigeria’s oil sector and has put President Goodluck Jonathan in a bad light.

The multinationals paid Nigeria’s government last April for control of a deepwater concession that could contain up to 9 billion barrels of oil. This money was later passed on to a company run by a former oil minister and convicted money launderer. Details of the deal have only just emerged.

Recently published court documents showed that the government agreed to transfer the exact proceeds from Shell and ENI – $1,092,040,000 – to Malabu Oil and Gas, a local company that has claimed ownership of block OPL 245, the deepwater concession.

Malabu is widely reported to be controlled by Mr Dan Etete, a former oil minister who was convicted of money laundering in France in 2007.

The campaign group, Global Witness, which has investigated the transactions, does not allege illegality on the part of Shell or ENI, but said “the whole business begs billion-dollar questions” about Shell and ENI’s commitment to transparency. The two companies have acknowledged buying the block, but said they dealt with the government, not Malabu.

The deal with Malabu also renews doubts over President Goodluck Jonathan’s pledge to reform the oil sector, coming so soon after a parliamentary report in April which estimated that $7 billion was misappropriated from a fuel subsidy programme between 2009 and 2011. The government did not respond to requests for comment, and neither Malabu nor the former oil minister could be reached.

New York court case

The agreements surrounding OPL 245 came to light during a court casein New York in February, in which a Russian lawyer who claimed to have helped Malabu negotiate its deal with the Nigerian government is seeking a $66 million commission.

According to the contract between Malabu and Nigeria’s government, which was signed by its attorney-general and minister of petroleum resources in April last year, Malabu was first granted prospecting rights in OPL 245 in 1998.

Mr Etete, who is named in the New York case as “Malabu’s principal”, was at that time oil minister under Gen. Sani Abacha. In 2001 the government took away Malabu’s licence, and Shell successfully bid to operate the block, sparking a long dispute between the companies. Malabu was re-awarded the block in 2006, and again in 2010. The $1.1 billion sum payable by the government to Malabu was in “full and final settlement” of any claims it had to the block.

Signature bonus of $208m

In their separate contract, also signed last April, Shell and ENI agreed to pay a signature bonus of $208 million on top of the $1.1bn, which was deposited in an account with JPMorgan in London.

The judgment in the New York case concluded that the Nigerian government was “the proverbial ‘straw man’ holding $1.1 billion for ultimate payment to Malabu.”

ENI denies agreements

ENI denied knowledge of the terms of “any possible agreements” between Malabu and the government related to OPL 245. “No agreements were entered into by ENI with any other third party entity in respect of such acquisition, including Malabu.”

Shell said payments were made to the government only. “In line with Shell’s information policy, we cannot reveal commercially sensitive information, and hence cannot comment further on the papers filed in the New York court proceedings.”

But Global Witness said both companies needed to detail what they did to try ensure that the $1.1bn did not go to Malabu, and accused Shell of trying to block proposed laws to force greater openness.

“Shell are lobbying hard on both sides of the Atlantic to stop the kind of project-by-project disclosure that would make these sorts of payments visible – whilst claiming to support global transparency. We find this utterly unacceptable.”


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