A lecturer at the University of Lagos, Dayo Ayoade, on Wednesday told an Italian Court in Milan that the award of the controversial Malabu Oil Block (OPL 245) to Shell and ENI was illegal.
Mr Ayoade, a consultant hired by Italian prosecutors who also teaches oil law in UNILAG, spoke at the resumption of the long running case involving the two oil giants.
According to Barnaby Pace of Global Witness, who was at the court, Mr Ayoade was hired by Milan prosecutors to determine whether the two oil giants met corporate and legal obligations in securing the controversial block.
The Malabu scandal involved the transfer of about $1.1 billion by Shell and ENI through the Nigerian government to accounts controlled by a former Nigerian petroleum minister, Dan Etete.
From accounts controlled by Mr Etete, about half the money ($520 million) went to accounts of companies controlled by Aliyu, popularly known in Nigeria as the owner of AA oil.
Anti-corruption investigators and activists suspect he fronted for top officials of the Jonathan administration as well of officials of Shell and ENI.
The transaction was authorised in 2011 by Mr Jonathan through some of his cabinet ministers and the money was payment for OPL 245, one of Nigeria’s richest oil blocks.
Although Shell and ENI initially claimed they did not know the money would end up with Mr Etete and his cronies, evidence has shown that claim to be false.
Shell, Eni, Mr Etete, Mr Aliyu and several officials of the oil firms are being prosecuted in Italy for their roles in the scandal.
‘Faulty award process’
On Wednesday, Mr Ayoade argued that the award process for OPL245 to Shell and ENI did not follow the procedure established in the Petroleum Act, Petroleum (Drilling and Production) Regulation and DPR Guidance Notes for Prospective Bidders.
“Failure to follow the relevant laws, policies and regulations is fatal to the legality of the OPL 245 award (Zebra Energy Ltd V FGN (2002)),” he was quoted to have said by the Human and Environmental Development Agenda (HEDA), another anti-corruption group monitoring the case.
“It is my considered view that the licence award on the basis of a FGN Resolution Agreement is anomalous and unprecedented in the Nigerian Oil and Gas Sector.”
Mr Ayoade explained that under a 2010 Nigerian law, in place before the 2011 deal Nigerian owned companies must be considered first in receiving oil licenses. Eni and Shell’s subsidiaries NAE and SNEPCO would not be considered Nigerian owned.
He added that after the civilian government came to power in 1999, the military rule-era system of discretionary allocations of oil licences was stopped because of its abuses and lack of transparency and a competitive bidding system was put in place.
The expert added, however, that discretionary allocations are still allowed in “marginal fields” but these small fields cannot be compared to OPL 245, which has two oil fields estimated to hold over 500 million barrels of oil, making it one of the biggest in Nigeria.
He added that it was an anomaly that the Nigerian Government chose to conduct this settlement in the case when Malabu had failed to pay the $210 million signature bonus to acquire the OPL 245 licence in the first place.
He suggested that Nigeria could have revoked the licence, adding that it was strange the Minister of Petroleum was not closely involved but the Attorney General, even where there were provision for tax exemptions.
On the role of Department for Petroleum Resources, he made reference to the letter from its most senior civil servant objecting to the deal just before it was signed. The letter called the deal was “highly prejudicial to the interests of the Federal Government”, he added.
Mr Ayoade explained that tax exemptions are built into tax laws or can be given by Executive Orders or directives by the President which have to be recorded in the Federal Gazette. But the deal is not in line with the law, he added, as the FGN cannot give an exemption without an order or law.
On the use of escrow accounts, he explained that it is a normal practice with International Oil Companies but the $1.1 billion payment into an escrow account and an account with the Nigerian Government to pay a private company Malabu Oil and Gas was concerning.
While the experts of the Nigerian Government are expected to make written and oral presentations on April 4, 2019, the presentation by the ENI experts are expected on April 10.
Last month, Mr Aliyu appeared as a witness before the court in Italy.
Mr Aliyu allegedly acted as a “middleman” for top officials of former President Goodluck Jonathan’s administration in the long-running controversy. Mr Abubakar however told the court his lawyers would need more time look into the allegations.
Mr Aliyu’s trial in Nigeria is being stalled because Nigeria’s anti-graft agency said he and other principal suspects have been on the run. Others are Mohammed Adoke, a former Attorney General and Minister of Justice, and Mr Etete.
They are being prosecuted alongside Shell Nigeria Exploration Production Company, and ENI, as well as Malabu Oil & Gas Ltd, Rocky Top Resource Ltd, Imperial Union Ltd, Novel Properties & Dev. Co. Ltd, Group Construction Ltd, and Megatech Engineering Ltd.
Although Mr Adoke has consistently claimed that he is being persecuted, he has declined to appear in Nigeria to face trial. Last year, the EFCC said it had begun moves to extradite the former official.
Strangely, Mr Jonathan, whose government brokered the deal in 2011, is not facing trial over the case.