Despite potential corruption charges against Shell and Eni over their acquisition of a licence for a Nigerian offshore oil block, the two European companies will continue to operate in what could be the biggest untapped hydrocarbon reserves in Sub-Saharan Africa, the country’s minister of state for petroleum resources said on Wednesday.
Speaking to delegates at the annual Offshore Technology Conference in Texas, US, Minister Ibe Kachikwu said that development of the oilfield will continue and the potential corruption charges being considered by Italian courts will not have an effect on the schedule to begin drilling in the Oil Prospecting Lease (OPL) 245 oil block, which holds an estimated 9bn barrels of oil. Nigerian, Italian and the Dutch investigators are currently considering whether to prosecute the two companies and eleven of their current or former executives for alleged corruption over the $1.3bn acquisition of the licence. Both Anglo-Dutch company Shell and Italy-headquartered ENI have denied any wrongdoing.
The controversy began in 1998, when the licence for the lucrative oil field was awarded to a Nigerian company called Malabu Oil and Gas, which was fronted by Dan Etete, who was the then Nigerian oil minister. There was then a tussle for control between Etete and Shell, at a time when it was just starting to become commercially viable to develop such deepwater fields. In 2010 and 2011, the licence was eventually awarded to Shell and Eni, with each company taking a 50% stake, in return for a payment of $1.3bn.
Yet far from settling the matter, the deal triggered corruption investigations in the Netherlands, Italy and Nigeria, leaving the reserves as far from development as ever. It had been hoped that fields on OPL 245 and other deepwater blocks would help to compensate for falling output in the heart of the Nigerian oil industry – the onshore and shallow water acreage of the Niger Delta.
Two big oil and gas fields have been discovered on the block, Etan in 2005 and Zabazaba in 2006, but have not yet been developed despite Eni’s plans to develop them via a floating, production, storage and offloading (FPSO) vessel. The block lies in water depths of 1,700-2,000 metres. Lying in deepwater acreage, the reserves could be developed relatively securely, protected from the militant attacks and petro-criminal activities of the Niger Delta. It is estimated that 9bn barrels have already been discovered on the block, which would represent about a quarter of Nigeria’s total proven oil reserves.
Dutch investigators raided Shell’s offices in The Hague last February in connection with bribery allegations surrounding the acquisition. Nigeria’s Economic and Financial Crimes Commission asked the Nigerian courts to freeze control of the asset this January. In April, the BBC stated that it had “seen evidence that top executives at Shell knew money paid to the Nigerian government for a vast oil field would be passed to a convicted money launderer.
It also had reason to believe that money would be used to pay political bribes. The deal was concluded while Shell was operating under a probation order for a separate corruption case in Nigeria.” Etete has previously been convicted of corruption by a French court. The reference to a probation order relates to a promise by Shell to the US Department of Justice to strengthen its internal controls in order to remain compliant with US anti-corruption legislation.
A joint investigation by BuzzFeed and Italian publication Il Sole suggested that Shell knew Malabu would receive some if not most of the money. Simon Taylor, one of the founders of NGO Global Witness, said: “This is one of the worst corruption scandals the oil industry has ever seen. The world’s fifth biggest company knowingly entered into a corrupt deal that deprived the Nigerian people of over $1bn.”
In a statement, Shell insisted: “Based on our review of the Prosecutor of Milan’s file and all of the information and facts available to Shell, we do not believe that there is a basis to prosecute Shell. Furthermore, we are not aware of any evidence to support a case against any former or current Shell employee.”
The two oil companies deny any wrongdoing, insisting that they paid the $1.3bn to the Nigerian federal government, while Shell states that its position is “that none of those payments were made with its knowledge, authorisation or on its behalf”. A spokesperson for Eni said: “Neither Eni nor Shell paid any monies other than as contemplated and recorded by the Block Resolution Agreement and did not pay to Malabu, to Chief Dan Etete or to any public officer.”
Many within the industry would argue that bribery has been part and parcel of participating in the Nigerian oil industry for many years. Whatever the outcome, OPL 245 is unlikely to be developed for years to come.
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