Malabu deal:The unending controversy over an oil block

26 February 2016, Lagos – The Economic and Financial Crimes Commission (EFCC) will begin full investigation into the $2 billion Malabu Oil Block in a matter of weeks. Already, some of those behind the deal have been running from pillar to post over the probe. YUSUF ALLI explores the facts and writes on the intrigues surrounding the ‘mysterious’ transaction.

Malabu-Oil-BlockLingering litigations on Malabu OPL 245

The revocation of Malabu’s licence on July 2, 2001, triggered a string of litigations on OPL 245. The shoddy handling of the aftermath by the Obasanjo administration accounted for the recurring disputes on the oil block.

At a point in 2006, the Obasanjo administration restored the OPL 245 to Malabu Oil and Gas. In an executive summary, a former Attorney-General of the Federation and Minister of Justice, Mr. Mohammed Bello Adoke, said: “Exxon-Mobil and Shell were then invited in April 2002 to bid for the same OPL 245 as contractors on a Production Sharing Contract (PSC) with the Nigerian National Petroleum Corporation (NNPC) despite the existence of subsisting contractual agreements between Malabu and SNUD with respect to OPL 245.

“Dissatisfied with the revocation, Malabu contended, among other things, that the circumstances leading to the revocation of its licence on Block 245 was not transparent and smacked of inducement and connivance from SNUD, which at the material time was its technical partner. It was also contended by Malabu that the subsequent re-award of OPL 245 to SNUD by the FGN was done under questionable circumstances.

“Malabu then petitioned the House of Representatives Committee on Petroleum to look into the matter. It is important to note that the House of Representatives Committee on Petroleum found no rational basis for the revocation and reprimanded Shell for its complicity.

“The committee also directed the Federal Government to withdraw the reaward it made to Shell and return OPL 245 to Malabu, the original allottee of the block. In addition to its recourse to the House of Representatives Committee on Petroleum, Malabu also instituted a suit before the Federal High Court in Abuja to enforce its claim to OPL 245.

The details of Malabu’s claims before the Federal High Court were as follows:

  • A declaration that the grant to the plaintiff of OPL 245 by the 1st to 6th Defendants evidenced by the Oil Prospecting licence No. 245 dated 15th May, 2001 effective from 29th April, 1998 signed on behalf of the minister of Petroleum Resources is valid and subsisting;
  • A declaration that the withdrawal by 1st to 6th defendants of OPL 245 and the subsequent revocation of the title deed (Oil Prospecting Licence 245 dated May 15, 2001) issued to the plaintiff, without any notice or reason and when the plaintiff has fulfilled all statutory and contractual terms in arbitrary, capricious, contrary to the rules of natural justice, illegal and null and void;
  • A declaration that the award of OPL 245 to Shell Nigeria Ultra Deep Limited, the 7th Defendant by the 1st to the 9th Defendants, illegal, null and void.
  • An order setting aside the award of OPL 245 by the 1st to 6th defendants to Shell Nigeria Ultra Deep Limited, the 7th defendant;
  • An injunction restraining the defendants by themselves, their servants, agents or privies from interfering with the plaintiff’s rights or interests in OPL 245 by allocating same to Shell Nigeria Ultra Deep Limited, the 7th defendants or however.

“The plaintiff also claimed against the defendants, jointly and severally, general damages in the sum of $100 million.

“Although, the suit was struck out by the FHC, Malabu proceeded to lodge Appeal No. CA/A/99M/2006, before the Court of Appeal, Abuja, Division in 2006. During the pendency of the appeal, an amicable settlement was entered into between Malabu and the FGN and in compliance with the terms of settlement executed by the Parties on 30th November 2006; OPL 245 was fully and completely restored to Malabu in consideration for its withdrawal of the Appeal.”

“It is instructive to note that the Minister of State, Dr. Edmund Daukoru, communicated the restoration of the OPL 245, to Malabu vide a letter dated 2nd December, 2006.

“The Minister of State’s letter also clearly stated that President Obasanjo had duly approved the restoration of OPL 245 to Malabu. It is important to state that the terms of settlement were filed in court as consent judgment and become binding orders of the court. The major clauses in the terms of settlement are reproduced below to show the issues, agreed upon by the parties.

  • In the spirit of an amicable settlement and without any admission of liability for any alleged wrongful, unlawful, unjust or any like conduct, the Federal Government agrees to re-allocate the oil block known as and covered by Oil Prospecting Licence 245 to Malabu Oil and gas Limited (herein referred to as ‘Malabu’) within 30 days from the date of this agreement;
  • The signature bonus in respect of OPL 245 shall be the sum of $210 million payable by Malabu to the the Federal Government. In this regard, the government acknowledges that Malabu had hitherto paid the sum of $2,040,000 to the FGN in respect of this oil block which sum shall be deducted from the aforesaid signature bonus leaving a balance of $207,960,000 to be paid by Malabu to the FGN within 12 months from the date of the re-instatement of OPL 245 to Malabu;
  • The parties agree that Malabu shall, if it so desires, be at liberty to assign OPL 245 or any part thereof in accordance with the provisions of the Petroleum Act;
  • Pursuant to this agreement and in consideration of the foregoing, Malabu hereby forever and absolutely discharges and releases the FGN, its officers, agents, agencies and privies howsoever described or any person acting for and/or on its behalf, from all claims or demands which Malabu has or may have and from all actions, proceedings, obligations, liabilities, losses and damages brought, made, incurred, sustained or suffered by Malabu now or in the future relating to, arising from or however connected with the withdrawal or revocation by the FGN from Malabu of OPL 245.
  • The parties agree that these terms of settlement shall be made the judgment of the court.

“A cursory reading of the above clauses in the terms of settlement would reveal that it was the agreement of the Parties that OPL 245 should be fully restored to Malabu; Malabu was executed to pay the balance of the signature bonus in the sum of $207,960,000 and Malabu was free to dispose of the block by way of assignment.

“Malabu, accordingly, released the FGN from liability on account of the actions taken in respect of OPL 245. It is apposite to note that no other individual or corporate body was a party to the court action by Malabu or the amicable settlement with the FGN.”

How OPL 245 assumed international dimension

Unimpressed by the 2006 Terms of Settlement on OPL 245, SNUD filed a complaint against the Federal Government at the International Centre for the Settlement of Investment Disputes (ICSID) in Washington DC. It made representations to the government on the impending arbitration. It also commenced a suit against the government before the Federal High Court, Abuja.

As far as SNUD was concerned, it remained the owner of OPL 245, having had a PSC with the NNPC since 2003 SNUD had paid $1 million out of the $210 million signature bonus to the Federal Government and kept the balance of $209 million in an Escrow Account with J.P. Morgan, pending the resolution of the dispute between Malabu and the Federal Government.

A document made available to The Nation said: “SNUD therefore claimed compensation and damages from the FGN for the revocation of the OPL 245 and its subsequent reallocation to Malabu in excess of $2 billion and relied on the expenditure its incurred under the PSC with the NNPC.

Efforts to settle the lingering dispute by successive administrations

In a letter to the EFCC, Adoke gave insights into past efforts to resolve the dispute on Malabu’s OPL 245.

He said: “It is apparent from the exchange of letters between the Presidency, Ministry of Petroleum Resources, SNUD and Malabu, that several meetings were held between President Obasanjo and SNUD to resolve the dispute.

The former President had proposed a middle course solution to the dispute; whereby, the interests of SNUD, Malabu and NNPC would be accommodated on OPL 245, i.e SNUD would be the contractor-operator, while NNPC and Malabu would be concessionaire equity right and concessionaire equity interests respectively.

“While it would appear that SNUD was comfortable with the above arrangement, Malabu contended that the solution failed to take cognizance of its ownership rights over OPL 245. Malabu asserted that the proposed solution amounted to be a unilateral imposition of the back-in regime, which did not apply in the circumstance.

“In general, Malabu was of the view that SNUD was not in a position to insist that it must be the contractor on OPL 245 and canvassed the full implementation of the terms of settlement that were already reduced to orders of the court.

“To reconcile these conflicting positions, the Minister of State, Petroleum Resources had by a letter dated 11th May, 2007 to President Obasanjo, proposed that a committed, made up of himself, the Attorney-General of the Federation, Minister of Energy, GMD of NNPC, DPR with external solicitors serving as resource persons, be constituted to enter into settlement negotiations with the affected companies.

“However, there is no indication on the records that the committee was able to arrive at any satisfactory outcome before President Umaru Musa Yar’Adua was sworn in as President on 29th May, 2007.

“Records also show that between 2007 and 2010 when the administration of President Umaru Musa Yar’Adua was in power, no satisfactory outcome was achieved in the lingering dispute as the arbitral proceedings initiated by SNUD before ICSID were still progressing. This remained the position until the demise of President Umaru Musa Yar’Adua GCRF in 2010.

“When President Goodluck Jonathan came to power, Malabu again petitioned the Federal Government to implement the terms of the out-of-court settlement of November 30, 2006 on the basis of which they had discontinued their appeal.

“The FGN, in considering Malabu’s request, took cognizance of the pending cases instituted by SNUD against FGN and/or Malabu, including Bilateral Investment Treaty (BIT) arbitration No. ARB/07/18 pending at ICSID to enforce SNUD’s rights to exclusively operate Block 245 as contractor on the basis of the 2003 PSC between NNPC and SNUD and the financial implications of defending theses actions on the public purse and opted for amicable resolution of the dispute.

“To resolve all the contending claims in satisfactory and holistic manner, due regard was given to the Terms of Settlement of November 30, 2006 which had been reduced to orders of the court; the underlying policy of encouraging the participation of indigenous oil and gas companies in the upstream sector of the oil industry and the fact that Shell, had substantially de-risked Block 245.

“To accommodate all these interests, a resolution agreement dated  April 19, 2011 between the Federal Government and Malabu Oil and Gas Limited was executed wherein the FGN agreed to resolve all the issues with Malabu in respect of Block 245 amicably and Malabu also agreed that in consideration of receiving compensation from the FGN, it would settle and waive any and all claims to any interest in OPL 245.

“The FGN and SNUD also agreed to withdraw and wholly discontinue all pending suits/arbitration in respect off Block 245.

“In furtherance of the resolution agreement, SNUD and ENI agreed to pay Malabu through the Federal Government acting as an obligor, the sum of $1,092,040,000 billion in full and final settlement of any and all claims, interests or rights relating to or in connection with Block 245, and Malabu agreed to settle and waive any and all claims, interests or rights relating to or in connection with Block 245 and also consented to the re-allocation of Block 245 to Nigerian Agip Exploration Limited (NAE) and Shell Nigeria Exploration and Production Company Limited (SNEPCO).

“It is therefore quite evident from the foregoing that the role played by the Federal government, its agencies and officials in relation to Block 245 was essentially that of a facilitator of the resolution of a long standing dispute between Malabu and SNUD over the ownership and right to operate Block 245.

“At all times material to the resolution of the dispute, the Federal Government was not aware of any subsisting third party interest in Malabu’s claim to OPL 245 and neither did any person or company apply to be joined in the negotiations as an interested party until the resolution of the dispute was concluded.”

Emergence of fresh claims against Malabu

“At a point when the nation was getting reprieve on Malabu Oil deal, contending claims cropped up against the company. The claims were from Abachas owned Pecos Energy Limited; Energy Venture Partners Limited (a British Virgin Island Company); and International Legal Consulting Limited (a Russian Company).

“It would be recalled that after the negotiations were concluded and relevant agreements executed, the FGN instructed J.P. Morgan Chase to pay Malabu the sum of $ 1,092,040,000 billion due to the company under the Block 245 resolution agreement. It was at this stage that the FGN became aware of the claims of:

  • Energy Venture Partners Limited (a British Virgin Island Company, which sued Malabu for the sum of $200 million together with damages and cost of $15 million;
  • International Legal Consulting Limited (a Russian Company), which commenced an Arbitration proceedings against Malabu at the London Court of International Arbitration suing for $75 million.

“There were letters dated 22nd July, 2011 from Edwards Angel Palmer & Dodge and the letter dated 3rd June, 2013 from Malabu in relation to the aforementioned claims.

“The Escrow Agent – J.P Morgan Chase – had pursuant to aforementioned claims paid the sum of $215 million into the High Court of Justice, England and also retained $75 million to await the outcome of the litigation. The balance of $801.5 million was then paid to Malabu’s bankers in Nigeria.

“When the FGN was informed that the litigation/arbitration were in favour of Malabu and that the court had lifted the freezing orders, the minister of Finance was accordingly advised by the office of the Attorney-General of the Federation to instruct the escrow agent to release the $75 million that was retained on account of the freezing order to Malabu in fulfilment of government’s obligations under the resolution agreement.

The consent order of the High Court of Justice Queens Bench Division, Commercial Court dated 7th May, 2013 on the strength of which the ministry of Finance was advised to instruct the escrow agent to pay Malabu the sum of $75 million retained pursuant to a freezing order.

“In addition to the above claim, the Federal Government also became aware of the claim of Pecos Energy Limited and Mohammed Sani (aka Mohammed Sani Abacha) vide a letter dated 20th January 2010 from A.A Umar & Co., the solicitor retained by them. “They asserted through their solicitors that they had bought OPL 245 from Dan Etete for $1.3 billion and that Dan Etete had, without their knowledge, disposed of their interests in OPL 245 to SNUD, NAE and SNEPCO.

The letter from A.A Umar & Co is enclosed as Annexure K. The letter under reference also called on the Attorney General of the federation as the Chief Law Officer of the Country to call a meeting of all disputing parties in order to settle the matter.

“It is instructive to note that the office of the Attorney-General had at all, times material to the resolution of the dispute maintained the position that it was only implementing the terms of settlement dated 30th November, 2006 between Malabu and the government over the ownership/right to operate OPL 245 and that records show that only Malabu was a party to the suits/arbitral proceedings instituted by the contending parties.

“Consequently, the position of the office of the Attorney-General was to refuse to be dragged into new issues/claims that were not covered by the terms of settlement of November 30, 2003 as it did not have the competence to resolve such issues.

“Accordingly, all such claims for competing interests in Malabu were referred to the company for resolution as an internal matter of the company. The Abacha family and associated companies were apparently dissatisfied with his position and petitioned the House of Representatives.”

Why the latest probe by EFCC is necessary

Expectedly, the latest probe of the $2 billion Malabu Oil deal by the EFCC will ascertain whether or not the country was short-changed by Malabu Oil and Gas Limited, SNUD and other foreign firms connected with the controversial OPL 245 Block.

The EFCC investigation coincided with the ruling of a London Court Judge, Justice Edis of the Southwark Crown Court, London, on December 14, 2015, stopping the payment of N17 billion to Malabu Oil and Company. The judge said he was “not sure that the administration of former President Jonathan acted in the interest of Nigeria by approving the transfer of the money to Malabu.

He said: “I cannot simply assume that the Federal Government which was in power in 2011 and subsequently until 2015 rigorously defended the public interest of the people of Nigeria in all respects.”

The judge’s ruling lent credence to suspicion that many public officers clandestinely feasted on the lingering crisis to enrich themselves, even no slush funds had been traced to any past public officer.

But the onus is on the EFCC to look at all issues including terms of settlement, mode of payment to Malabu Oil and Gas Limited, the fresh claims by some parties such as the Abachas, and the role of Etete in the deal.

The EFCC will determine whether or not Etete merely managed a portfolio or a real company to make money from a nation which gave him opportunity to serve as its oil minister.

In 2007, a French court sentenced Etete in absentia to three years in prison and a fine of 300,000 Euros (about $440,000) for money laundering.

Etete was “convicted of using 15 million Euros in funds obtained fraudulently to purchase properties in 1999 and 2000 including a chateau in northwest France, a Paris apartment and a luxury villa in the chic Paris suburb of Neuilly.”

Etete was asked to pay 150,000 Euros to Nigeria in compensation for moral prejudice and 20,000 Euros in fees. His front, Richard Granier-Defferre(French businessman) was  sentenced to 12 months imprisonment with a fine of 150,000 Euros.

It was unclear if Etete paid the moral prejudice fines into the coffers of the Federal Government. He is however running into one legal web or the other on the Malabu oil deal.

But, the most curious thing was that the former administrations of Obasanjo and Jonathan kept on relating with Etete and Malabu Oil and Gas even after he was jailed by a French court.

In July last year,  a London High Court ordered Etete to pay $110.5 million to a middleman who helped broker the controversial OPL-245 oil block.

Although the French Government in 2014 pardoned Etete through a warrant signed by the magistrate in charge of National Criminal Record, Xavier Pavageau, the trends of the deal indicated that the ex-minister never walked alone.

With the EFCC sent to swing into action, many underground accomplices of Etete would soon be unmasked.

According to a top source, those the EFCC may interact with include Adoke, former Petroleum Resources minister, Mrs. Diezani Alison-Madueke, one-time Attorney-General and Minister of Justice, Mr. Bayo Ojo, Daukoru, former Finance minister, Olusegun Aganga, former GMD of NNPC, Austen Oniwon and top officials of the Department of Petroleum Resources.

The Nation also learnt that some International Oil Companies (IOCs) are ready to appear before the EFCC with relevant documents on the intrigues of OPL 245.

Adoke has set the tone for the ongoing investigation in a letter to Vice President Yemi Osinbajo.

He wrote in the letter: “It is therefore incorrect and contrary to as widely claimed in some quarters that the money that was paid to Malabu, which was only warehoused in an escrow account, was meant for the Nigerian Government and that the country was thereby short-changed.”

The ball is in the court of the anti-corruption chief Ibrahim Magu to unearth the riddles surrounding the Malabu OPL 245.

 

 

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