Malabu Scandal: Nigerian govt demands $3.5 billion from Eni, Shell

MALABU: Shell-and-Eni
Shell and Eni photo used to illustrate the story. [Photo credit: THISDAYLIVE]

The Nigerian government is seeking about $3.5 billion in damages from oil giants Eni and Shell over the controversial Malabu oil deal, PREMIUM TIMES has gathered.

The new claim is contained in a London court filing by the Nigerian government against the two oil multinationals and other parties involved in the long-running case.

The court documents, obtained by this newspaper’s London partners, Finance Uncovered, and seen by PREMIUM TIMES, shows the government also alleged that the Malabu deal was “corrupt” and not done in the interest of Nigeria.

The government accused Eni, Shell, Malabu and other defendants of, among others, “fraud or/and bribery, dishonest assistance and unlawful means of conspiracy.”

PREMIUM TIMES earlier reported how documents showed that a British executive and then CEO of Arcadia Petroleum Ltd, Peter Bosworth, received money from a key figure in the scandal and former Nigerian oil minister, Dan Etete.

New filings lodged at the London court showed that the Nigerian government is claiming that the nation was deprived of the disinterested advice of its ministers and agents, who acted as parties in the deal, adding that the officials acted with sinister motives and shortchanged the nation.

Scandal

At the centre of the Malabu scandal is the transfer of about $1.1 billion by oil multinationals, Shell and ENI, through the Nigerian government to accounts controlled by Mr Etete.

Investigations showed that about half the money ($520 million) went to the accounts of companies jointly controlled by Abubakar Aliyu, popularly known in Nigeria as the owner of AA oil, and Mr Etete. Anti-corruption investigators and activists suspect Mr Aliyu fronted for top officials of the Goodluck 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 the block, considered one of Nigeria’s most lucrative. 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.

After a joint investigation by Global Witness and Finance Uncovered, Shell later admitted it did know the money would go to Mr Etete. Shell, Eni, Mr Etete, Mr Aliyu and several officials of the oil firms are being prosecuted in Italy for their roles in the scandal.

Mr Jonathan, who is not under any probe on the matter, has denied wrongdoing.

New Claims

According to documents seen by PREMIUM TIMES, the Nigerian government claims the block was undervalued even at the time it was sold in 2011.

According to the filing, the block’s value, as at 2011 was about $3.5 billion even though it was valued at $1.3 billion. The government also claimed that it only received what it now considers to be an insufficient $209 million signature bonus in April 2011.

The government said it claims “further or alternatively, compensatory damages for the undervalue at which the OPL 245 rights were sold.”

It added that, “The amount of the undervalue will be a matter for expert evidence to be particularised in due course. The FRN estimates the value of OPL 245 in April 2011 to have been at least US$3.5bn for which it received no or negligible value (save that the FRN will give credit for any recovery pursuant to sub-paragraph 2(a) above, and the US$209m signature bonus that it received in April 2011).”

“Further and alternatively,” the Nigerian government also demands, “an account of all past and future profits (or a declaration that the FRN—Federal Republic of Nigeria—-is entitled to all future profits) made by each of Shell, Eni and/or Malabu, EVP and ILCL, out the unlawful exploitation of the OPL 245 rights, including the amount by which they benefitted from favourable terms, that they would not have received had bribes not been paid.”

The new claim, dated April 8 and signed by Jonathan Cary, was filed against 14 defendants, including Shell, Eni, Malabu and their respective subsidiaries.

Last month, PREMIUM TIMES reported how a consultant, who stood as witness before an Italian court in Milan, faulted the valuation of the controversial block by the oil giants, Eni and Shell.

Stephen Rogers, who appeared before the court as an expert witness for Nigeria, presented testimony on the economic cost of the 2011 deal for OPL 245. Mr Rogers is a partner at the oil consultancy group, Arthur D. Little, with over 30 years experience at Hess, BP and TXU/EON.

Mr Roger’s analysis found that the market value of OPL 245 was $3.5 billion in 2011, with $80 per barrel of oil and on the terms Shell and Eni bought the block.

Eni’s expert had valued the block higher at $4.5 billion but they argued, however, that despite the valuation, the price paid ($1.3 billion) was reasonable because of various ‘risks’.

But, Mr Rogers in his submission criticised their position, saying Eni’s expert’s method is “double counting the discounts for risk”.

Mr Rogers also evaluated the value of gas, which Eni’s expert did not include, at $167 million.

In the run up to the deal, Shell and Eni valued the block in 2010 and 2011 respectively at $3.3 billion ($80 per barrel) and $3.5 billion ($70 per barrel).

But using an average of price paid per barrel in other deals done in West Africa, Mr Rogers calculated the value of OPL 245 as $2.6 billion – $3.7 billion but said these are definitely too low as “the terms of the 2011 deal are unusually favourable to the companies compared to other deals.”

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