The "strange" Opl 245 deal. And the billion passed by Eni to the Nigerian government to Etete's Malabu

[by Antonio Tricarico] published on Valori.it

With the month of April at the Opl 245 trial - the mega Nigerian oil field for which Eni, Shell and 13 very high executives are on trial in Milan for international corruption - comes the season of technical consultants for the parties.

Many irregularities emerge, according to experts, "oddities" in the management of the entire Nigerian affair.

“Billion-passing” Nigerian government

One of the "gems" of the hearing on Wednesday 3 April comes from the legal consultant of the prosecutor's office, Professor Dayo Ayoade, an expert in energy law at the law faculty of the University of Lagos. According to Ayoade, the payment by Eni and Shell for the license for the exploitation of the offshore field would have occurred through the use of an escrow account at JP Morgan in London, where Eni paid 1,092 million dollars in 2011 to the Nigerian government, which acted as an intermediary to pay another company: Malabu Oil and Gas, controlled by the then Oil Minister Dan Etete.

There is no case of this kind, with the government operating in excess of billions, in Nigeria's troubled history.

The many "irregularities" of the Opl245 deal

The hearing on April 3 began, precisely, with Professor Dayo Ayoade. With a firm and clear tone, the professor summarized his work for the Prosecutor's Office by placing emphasis on the various irregularities, in his opinion, with respect to Nigerian law and the practice of the oil industry relating to the Nigerian business of Eni and Shell.

Ayoade recalled the original 1998 direct assignment of the Opl245 license to the local company Malabu. Since then - it was the time of Sani Abacha's dictatorship - the Abuja government has had a policy of "indigenization" of the oil sector, i.e. aimed at encouraging as much as possible the fact that companies controlled at least 51% by Nigerians acquired oil licenses to be developed together with foreign oil majors.

Strange license assignments for the deposit

It is strange that after 13 years of disputes, the license for the exploitation of one of the largest deep-water fields in the country ended up in 2011 with two international companies without any "indigenous" presence, when the same policy had been strengthened in the Oil and Gas Content Act of 2010. Moreover, since the 2000s it had become the predominant practice to hold public tenders to assign licenses, with the aim of selling at higher prices. But on Opl245 the option of discretionary assignment continued to be preferred.

Ayoade was clear on the use of a resolution agreement, i.e. a legal instrument for resolving disputes, on the assignment of the license in 2011. It was contradictory that Eni, not involved in the pending disputes between Shell, Malabu and the Nigerian government, was party to a dispute resolution agreement.

Even more anomalous was the fact that Malabu had regained its license in 2006 without paying the full signing bonus and that the government had not demanded payment of the 20 million dollars owed. Not a "problem" according to the judicial authorities presided over by the then Minister of Justice Bayo Ojo. The same one who then, in 2011, received 10 million of the Opl245 bribe from Dan Etete. In short, to Ayoade's knowledge, in Nigerian history no oil license has ever been awarded under this instrument of private law.

Anomalous tax exemptions for Eni and Shell

Even more strange is the fact that the Minister of Oil - who has jurisdiction over the granting of licenses - was not involved in the negotiation of the resolution agreement. Furthermore, just a month after the signing, the Department of Petroleum Resources had expressed formal objections to the noose clauses contained in the agreement. An agreement which, according to Ayoade, grants wide-ranging tax exemptions to Eni and Shell without being in line with Nigerian legislation. Furthermore, these exemptions are either regulated by Nigerian law, as is the case for some industrial sectors or specific projects, or emanate, rarely, from a presidential executive order. But certainly not from a resolution agreement.

An exception to Nigerian legislation

In short, the Opl245 case is an exception to Nigerian legislation from many points of view. In particular, there has never been a Sole Risk contract that governs a license that does not comply with the Deep Offshore PSC Act of 2003, since the beneficiaries are only foreign companies and not Nigerians, contrary to the provisions of the law dedicated precisely to the exploitation of oil in deep waters. The profit sharing agreement itself - production sharing agreement - is not a production sharing contract at all according to the 2005 guidelines, since the government is not a party to the dispute and therefore does not benefit from the so-called profit oil, thus having lost revenue estimated at several billion dollars. It is no coincidence that already in 2014 a special commission of inquiry of the Chamber of Deputies had asked for the cancellation of the agreement. A request that went unheeded by the then government.

Ayoade also underlined that, if Nigeria wanted to take advantage of the rights to return to the license (back-in), according to the 2011 noose agreement it could only do so for 50% of this and only as a licensee, but not as a contractor, and above all having to pay just under a billion dollars which according to the Nigerian oil law this "sovereign" right should be at zero cost. Surprisingly, the defense decided not to carry out any cross-examination of the prosecution's consultant, perhaps fearful that it might highlight further irregularities in the deal.

Similar script in the hearing on Thursday (4 April), which saw the examination of Nigeria's technical consultant as a civil party, the oil expert Stephen Rogers of the consultancy firm Arthur D. Little. After clearly explaining the models applied to carry out an evaluation of the block, the Nigerian government, with its expert, announced that the value of the license in 2011 was 3,511 million dollars, and not the 1,300 paid by Eni and Shell. A big difference that makes the Opl 245 deal even more unique. From April 10th the word goes to the experts.

Listen to the audio of the hearing on 3 April from Radio Radicale: