…The Malabu oil deal example
…Group seeks UK intervention to recover funds
29 October 2015, Sweetcrude, Lagos – International concern is mounting over the mismanagement of Nigeria’s oil industry funds, with the corruption watchdog, Global Witness, urging the help of the United Kingdom to recover funds lost by Africa’s leading oil and gas producer in the famous but controversial Malabu oil deal.
A letter cited by Reuters has asked UK’s Crown Prosecution Service, CPS, to freeze the assets of those involved in the Malabu oil deal through which Nigeria lost more than a billion dollars due to lack of transparency.
Global Witness revealed in its recent report titled, ‘How to Lose $4 billion’ that in Nigeria and two other African countries – Democratic Republic of Congo and Angola – lucrative oil and mining assets worth $4 billion were awarded to companies with hidden owners, thereby diverting vast resource revenues to unknown private pockets.
Under this arrangement, Nigeria lost $1.1 billion in the Malabu oil deal, the loss coming due to lack of beneficial ownership transparency in the oil and gas industry, Global Witness said in its report.
Reports have indicated that more than half of the $1.1 billion (N171.32 billion) paid to Malabu Oil and Gas for the procurement of one of Nigeria’s richest oil fields, OPL 245 by Royal Dutch Shell and Italian firm Eni was used to bribe Nigerian politicians and intermediaries who helped to secure the controversial deal.
According to Italian prosecutors, some of the N83 billion ($533 million) slush money was used to buy private jets and armoured vehicles.
“We are investigating many money transfers to many people in various countries who received sums that vary from millions of dollars to thousands of dollars,” Reuters quoted the letter to the UK’s Crown Prosecution Service as reading.
British prosecutors acting on the request to freeze the assets of those involved in the Malabu oil deal, have already frozen two accounts with combined sum of N29.5 billion ($190 million) belonging to the chief intermediary, Emeka Obi.
Former oil minister, who was convicted for money laundering in France, Dan Etete, owns Malabu Oil and Gas. The company was incorporated five days before the oil block was awarded to it in 1998 during the regime of military dictator, Sani Abacha.
With regard to how anonymous companies made $1.1 billion disappear in a single deal in Nigeria, Global Witness noted that “in 1998, the then Minister of Petroleum Resources, Dan Etete, awarded a company called Malabu Oil and Gas a huge oil block off the West African coast called ‘OPL 245’, without publicly declaring that he was the owner of the company.
“The OPL 245 block was said to have been purchased in 2011 by European oil companies, Shell and Eni, who paid $1.1 billion into an account set up by the Nigerian government”.
The report stated, “The government agreed to transfer the same amount to a Nigerian company called Malabu Oil and Gas, which was secretly owned by a former oil minister, Dan Etete. Malabu eventually passed $800 million of the money to a network of Nigerian companies with anonymous owners, which were apparently vehicles for paying others involved in the deal”.
Shell and Eni had always denied paying money to Malabu, however, Global Witness said court evidence arising from suits brought against Malabu for unpaid fees by the middlemen involved in facilitating the deal showed that they knew that the funds would go to the company.
Global Witness noted that the OPL 245 deal had now been investigated by authorities in three countries, saying the Nigerian House of Representatives in a 2014 vote called on the government to cancel the deal, and the Economic and Financial Crimes Commission “is also investigating, and recently questioned Dan Etete.”
“With a new government now in power publicly committed to rooting out corruption, there is a risk that Shell and Eni may have their exploration rights revoked because of the way the block was acquired,” it said. It also added, “This iconic case demonstrates why EITI must embrace beneficial ownership disclosure as a matter of urgency”. Global Witness said if the EITI required disclosure of beneficial owners, it would pave the way for real transparency in the country.