15 May 2017, Sweetcrude, Houston — News of the Nigeria Agip Oil Company, a subsidiary of Italy’s ENI decision to invest $15 billion in the construction of a refinery and a power plant in the Niger Delta has all the trappings of a bribe especially in the face of an ongoing criminal investigation and threat of litigation against the company and another international oil company, before an Italian court.
Shell and Agip are currently mired in a billion-dollar bribery scandal over the 2011 acquisition of OPL 245, a vast undeveloped but lucrative Nigerian oilfield off the coast of the Niger Delta. Shell first acquired a stake in the oilfield back in 2001 alongside Malabu, a company controlled by Dan Etete, Nigeria’s oil minister between 1995 and 1998. Etete is believed to have acquired the rights to the oilfield under questionable circumstances while serving as minister.
After twenty years of legal wrangling over ownership of OPL 245, in 2011, Shell and Eni paid the Nigerian government $1.3 billion to acquire the lease. But that money never went into the federation account. Investigations have revealed that nearly all of it went to Etete who was convicted of money laundering in France in 2007. Through Etete, much of the money is believed to have ended up being shared by high-ranking Nigerian government officials.
Shell initially denied knowledge of payments made to Malabu, Etete and any other Nigerian officials, saying that its dealings with regard to the acquisition of OPL 245 were legal and that none of the questionable payments “were made with its knowledge, authorization or on its behalf.” But a trove of emails published by anti-corruption charities, Global Witness and Finance Uncovered, suggest that is not the case. Indeed, the emails show “evidence” of Shell’s senior employees “knowingly participating in a vast bribery scheme,” according to Global Witness.
The emails show correspondence between senior Shell officials acknowledging the possibility that almost all the money paid for OPL 245 could be passed to government officials, through Etete, in underhanded deals. Following the published emails, in a reversal of prior denials, Shell has now admitted that it engaged with Etete during negotiations to acquire OPL 245. For its part, an Eni spokeswoman told Quartz the company, through its Nigerian subsidiary, paid “exclusively to the Government of Nigeria in respect of title to OPL 245” and that the company “did not pay any money other than as contemplated and recorded by the Block Resolution Agreement” to “Malabu, to Chief Dan Etete or to any public officer.”
Erstwhile president Goodluck Jonathan, the then-president, named was named as a beneficiary of the bribe distributed by Etete, in documents from Italian prosecutors. Jonathan is said to have received nearly $500 million, which was split with other high-ranking members of his administration, including Diezani Alison-Madueke, his embattled former minister of petroleum. For his part, Jonathan has denied any wrongdoing, claiming the allegations are sponsored by people threatened by his “continuously rising profile in the international community.” Italian prosecutors have recommended that Claudio Descalzi, Eni CEO, stand trial for corruption.
OPL245 is one of Africa’s largest undeveloped oilfields with an estimated nine billion barrels of “probable reserves,” according to Global Witness. Acquiring the oilfield could have also seen Shell’s global “proven oil reserves” increase by a third, Global Witness says. It is, therefore, no wonder Shell took the risk of getting caught up in such a murky deal.
While OPL 245’s probable reserves could generate $500 billion worth of oil at current market prices, that’s not necessarily a measure of its actual worth, Dolapo Oni, head of energy research at Ecobank Development Company, disclosed to Quartz Media. With attendant costs and taxes accompanying eventual exploration of the oilfield, Oni says, based on 2011 oil prices, OPL 245’s actual value was likely around $1.9 billion—$600 million more than Shell and Eni paid for it.
While there isn’t clarity regarding resolution of the circumstances under which Shell and Eni paid $1.3 billion for OPL 245, an amount which never got to the federation account, it is mind boggling that the same federal government which has made the anti-corruption crusade a major hallmark of its governance could announce $15 billion project development for the Zabazaba oil field, being promoted by a party to the corruption allegation.
Industry enthusiasts and watchers are concerned that that announcement has generated more questions than answers leading a Lagos-based lawyer to question the government’s commitment to the anti-corruption crusade of the President Buhari administration.
“Is the federal government’s anti-corruption agency, the Economic and Financial Crimes Commission, EFCC working at cross purposes with the government? What resolution has the government reached with Shell and Eni? The lawyer who craved anonymity said.
“Prof Yemi Osinbajo, the Vice president is a sound legal mind and so is Dr. Ibe Kachikwu, the minister of state for petroleum resources, they are in a better position to appreciate the legal and ethical implication of their interface with Eni in the face of the unresolved scandal regarding the acquisition of OPL245.
“Also, the decision to prepare a Memorandum of Understanding, MoU, for the construction of a 150,000 barrel per day, b/d, refinery by Agip in the Zabazaba field, located in Oil Prospecting Lease, OPL, 245 appears to have endorsed the acquisition, obviating whatever the ongoing investigation into the circumstances of the acquisition may unearth,” the lawyer noted.
Meanwhile, the $15 billion announced by the government for the refinery and power project has also raised concern among within the industry among those who wonder why a mid-sized refinery and thermal power plant would cost so much. It would be recalled that the 650,000 b/d refinery complex, including fertiliser and petrochemical units, being built by the Dangote Group at the Lekki Free Trade Zone in Lagos, would cost $9 billion.
Kachikwu said that the deal with Eni aims to discourage oil companies operating in Nigeria from the continuous importation of fuel while encouraging them to refine oil locally.
“We just finished a meeting with the acting president and Agip. In the meeting, we dealt with the issue of Agip’s investment in the Zabazaba field and their cooperation with us in the repairs of the Port Harcourt refinery. We reviewed, following my meeting with Agip, an agreement that the firm will build a brand new refinery of 150,000 b/d capacity which will be located in Port Harcourt or Brass.
They have accepted and are preparing a memorandum of understanding along this line. The effect of this is that oil companies operating in Nigeria will begin to migrate from only exporting crude and begin to look at how to start refining crude so that we will be able to meet our local consumption.
While the Nigerian economy can use all the foreign direct investment it can get to keep the wheels of commerce going, a thriving and egalitarian society can only be sustained by the integrity of the drivers, that is, those who govern. It, therefore, behoves on the Vice president and the minister of state for petroleum resources a duty to explain to the Nigerian people the circumstances under which they decided to wish away the ongoing investigation of Agip’s complicity in the acquisition of a state asset potentially valued at $500 billion.
Until they do so, Agip’s proposed $15 billion investment will have all the trappings of a bribe.