Shell dragged into Malabu Oil corruption probe

Royal Dutch Shell has been dragged into a corruption probe linked to the sale of the Malabu Oil and Gas offshore block in Nigeria, the company confirmed wednesday.

According to AFP, following revelations in the Italian media, the Anglo-Dutch oil multinational said that its offices had been “visited” by anti-fraud investigators.

“We can confirm that representatives of the Dutch Financial Intelligence and Investigation Service (FIOD) and the Dutch Public Prosecutor recently visited Shell at its headquarters in The Hague,” a spokesman said.

“The visit was related to OPL 245, an offshore oil block in Nigeria that was the subject of a series of long-standing disputes with the Federal Government of Nigeria. Shell is cooperating with the authorities and is looking into the allegations, which it takes seriously.”

An Italian daily, Corriere della Sera, reported earlier that the Dutch investigators were working in collaboration with Italian prosecutors and looking into Shell and Italian energy group ENI’s 2011 acquisition of joint exploitation rights to OPL 245 previously held by Malabu Oil and Gas, which is estimated to contain up to nine billion barrels of crude.

Prosecutors in Milan have been investigating ENI’s executives involved in the deal since 2014. Under the licensing accord, ENI made a payment to the Nigerian government of $1.09 billion to secure joint ownership while Shell, which already owned a 40-percent stake, handed over $200 million.

Most of this money was subsequently passed on to Malabu Oil and Gas, a company owned by Chief Dan Etete, a former Minister of Petroleum under the Sani Abacha’s military administration.
In an episode that has come to be regarded as emblematic of Nigeria’s problems with corruption, Etete had awarded the rights to the block to Malabu in 1998, at a time when he was close to Abacha.
The probe into ENI was triggered off after an intermediary in the deal, Mr. Emeka Obi, sued Malabu in Britain’s High Court and won an order that the company pay him $110 million in unpaid fees.

ENI has always maintained that its actions in Nigeria have been beyond reproach and that all the money it had paid in Nigeria had gone directly to the government. Shell also insisted it had not been involved in any wrongdoing. “Shell attaches the greatest importance to business integrity,” a spokesman said.

“It’s one of our core values and is a central tenet of the principles that govern the way we do business. All employees are expected to uphold these principles and failure to do so will result in consequences up to and including dismissal.”

The said oil block has been at the centre of a series of long-standing disputes and probes.
It was initially awarded in 1998 by Etete to Malabu Oil and Gas, a company in which he was a shareholder, but was subsequently revoked by the administration of President Olusegun Obasanjo in 2001.

Obasanjo reallocated it to Shell Nigeria Ultra Deep Limited (SNUD) in 2002 under a production sharing contract (PSC).

At the time of revocation and re-award, Malabu and SNUD had a binding joint operating agreement to exploit the block with SNUD as technical partner.
Aggrieved over the revocation, Malabu had petitioned the House of Representatives Committee on Petroleum and after a public hearing, the House recommended that the block be restored to Malabu.

Malabu also sued the federal government and SNUD at the Federal High Court seeking an order setting aside the re-allocation to SNUD and a restoration of the block to Malabu.
The suit was struck out but on appeal, the parties entered into a settlement dated November 30, 2006 and the terms of settlement were filed in court as consent judgment.

A key term in the settlement was the restoration of the oil block to Malabu.
Pursuant to the terms of settlement, Obasanjo in 2006 rescinded his earlier revocation and restored the oil block to Malabu.

However, at this time, SNUD claimed to have expended huge resources of over $500 million to de-risk the oil block and had found oil in commercial quantity under the existing arrangement with the federal government, despite pending litigation instituted by Malabu.

Shell was aggrieved over the unilateral revocation and had commenced arbitration proceedings at the International Center for Settlement of Investment Disputes (ICSID), claiming over $2 billion from the federal government for breach of contract, loss of investment and special damages.
It was under these circumstances that the administration of former President Goodluck Jonathan encouraged a definitive resolution between the parties.

Following the intervention by the Jonathan government, the oil block was then sold in 2011 to Eni and Shell, and according to documents from a British court, Malabu received $1.09 billion from the sale, while the rest went to the federal government.

The Economic and Financial Crimes Commission (EFCC) recently launched a probe into the transaction.