MALABU OIL SCAM: Trial Postponed To May 14 Because Of Backlog Cases At The Milan Court

By Andrew Ward

It is a saga involving one of Africa’s largest untapped oilfields, two of Europe’s largest companies and the biggest corruption trial to face the energy industry for years.

The case of Nigeria’s Oil Prospecting Licence 245 was due to reach court this week in Italy, where Royal Dutch Shell and Eni face prosecution for alleged bribery in connection with a $1.3bn payment in 2011 to gain control of the prized asset.

Claudio Descalzi, chief executive of Eni, is among five current and former employees of the Italian group also facing individual charges, together with four former senior Shell employees.

At a brief procedural hearing on Monday, the start of the trial was postponed until May 14 because of a backlog of cases at the Milan court. The delay was in keeping with a dispute whose origins stretch back 20 years to the Nigerian government’s award of OPL-245 to a company, called Malabu, linked with the country’s then-oil minister, Dan Etete.

Subsequent wrangling for control of the asset has been described by Global Witness, a campaign group, as “one of the worst corruption scandals the oil industry has ever seen”. The case shines a rare spotlight on the murky relationships between Nigerian politicians and international oil companies in a country that has struggled to translate rich natural resources into wider economic prosperity.

Shell and Eni, which each acquired 50 per cent of OPL-245 under their 2011 deal, deny any wrongdoing. So too does Mr Descalzi and the other individuals charged. Their lawyers will now have a few extra weeks to prepare the defence against allegations that much of the money paid for the licence was destined for Mr Etete and a network of Nigerian politicians and officials — and that the companies knew it.

As a result of the deal, the Nigerian people “lost out on over $1bn, equivalent to the country’s entire health budget,” says Simon Taylor, co-founder of Global Witness, which campaigns against corruption in natural resource industries.

Shell has had an interest in OPL-245 since 2001, when it agreed a partnership with Malabu to explore for oil and gas on the southern edge of the Niger Delta. Within months, Malabu’s licence was revoked by a new Nigerian government and Shell won a new tender that gave it exclusive development rights for $209m. This was followed by years of legal wrangling between Shell and Malabu, which maintained its claim on OPL-245, as successive Nigerian administrations handed the licence back and forth between the two companies.

The 2011 deal with the Nigerian government, under which Eni took over as operator of the licence, was intended to settle ownership rights once and for all. Instead, it drew the attention of Italian prosecutors as well as investigators in Nigeria and the Netherlands, where criminal inquiries are ongoing. The UK Serious Fraud Office and US Department of Justice are also known to have taken an interest, although neither has so far announced formal proceedings.

The Italian trial centres on what was known by Shell and Eni about who would ultimately benefit from more than $1bn paid into a Nigerian government escrow account as part of the deal.

Campaigners point to leaked emails in which a former UK intelligence officer hired by Shell wrote of Mr Etete being able to “smell the money” as the deal neared. Other internal Shell emails said Nigeria’s then-president Goodluck Jonathan expected a cut of the proceeds and that his government wanted the transaction completed quickly “driven by expectations about the . . . political contributions that will flow as a consequence”.

Mr Etete, who was convicted of money laundering in France in a separate 2007 case, could not be reached for comment. He and Mr Jonathan have in the past denied wrongdoing.

Shell and Eni acknowledge that they knew Malabu would receive money from the Nigerian government to settle their claim on OPL-245 but both deny any knowledge of what happened to the funds beyond that.

“If the evidence ultimately proves that improper payments were made by Malabu or others to then current government officials . . . it is Shell’s position that none of those payments were made with its knowledge, authorisation or on its behalf,” Shell said in a statement.

Eni, whose board has stood by Mr Descalzi, expressed “its full confidence in the judicial process and that the trial will ascertain and confirm the correctness and integrity of its conduct.”

Judith Tyson, research fellow at the Overseas Development Institute, a UK think-tank, says the case highlights the risks facing multinational companies in countries with poor governance structures in an era when European and US prosecutors are increasingly empowered to target overseas corruption. “When you pay money to governments, do you know who you are really paying?” she says.

The Italian trial is expected to last 12-18 months. In the meantime, OPL-245 and its estimated 9bn barrels of oil — about a quarter of Nigeria’s proven reserves — remains caught in legal limbo.



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