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Shell, Eni, and the $533 million paid out in Nigerian bribes

Screen Shot 2014-09-11 at 23.20.44In October 2014 the media reported that Italian prosecutors were alleging that half of the $1.1 billion paid for an oil producing lease (OPL) by Eni and Royal Dutch Shell had gone on bribes to Nigerian politicians, intermediaries and others.

Extracts from an article by Babajide Oladipo Ogundipe: 8 December 2014

In October 2014 the media reported that Italian prosecutors were alleging that half of the $1.1 billion paid for an oil producing lease (OPL) by Eni and Royal Dutch Shell had gone on bribes to Nigerian politicians, intermediaries and others. Reuters reported that Italian prosecutors had placed Eni’s former and current chief executive officers under investigation for alleged international corruption and had requested their UK counterparts to assist in freezing suspect assets. The prosecutors alleged that at least $533 million had been paid out to Nigerian officials and others as part of the scheme. The two individuals under investigation, along with Eni, denied any wrongdoing

This case, involving OPL 245, has seen many twists and turns over the past few years. In April 1998 Nigerian company Malabu (incorporated less than one week before) was granted OPL 245 over an area approximately 2,000 square kilometres off the Nigerian coast, in the Eastern Niger Delta region, by the incumbent military-led government. It later emerged that the then minister of petroleum resources had a major – if not the entire – beneficial interest in the company. In submissions to an investigation commenced by the House of Representatives in October 2012, the government described the grant of OPL 245 to Malabu as “flawed” and “unethical”.

In March 2001 Malabu assigned a 40% interest in the OPL to a company owned by Shell. However, four months later, the civilian government, which had been in office since late May 1999, revoked the licence. In May 2002 Nigeria’s state-owned petroleum corporation entered into a production sharing contract in respect of OPL 245 with the Shell company that had previously taken a 40% interest in the block. This sparked a dispute between Malabu and Shell, and in late December 2006 OPL 245 was re-awarded to Malabu. This development resulted in Shell commencing International Centre for Settlement of Investment Disputes arbitration proceedings against Nigeria.

Malabu, being essentially a shell company with no assets other than OPL 245, had no means of exploiting OPL 245 other than with the assistance of a major oil company. However, with all the controversies swirling around OPL 245, it was unsurprisingly unable to make any progress towards finding a partner. OPL 245 was eventually transferred to Shell and Eni through an arrangement that saw Malabu relinquish its interests in OPL 245 to the Nigerian government in exchange for $1,092,040,000. On the same day, Shell and Eni agreed to pay the Nigerian government the same amount in exchange for rights over OPL 245. New York Supreme Court Justice Bernard J Fried described the role of the Nigerian government as that of “the proverbial straw man” who was “holding $1.1 billion for ultimate payment to Malabu”. This sum was paid to an escrow account with JP Morgan Chase and at least $800 million was disbursed to Malabu on the instructions of the Nigerian government. The English High Court froze $215 million in July 2011 on the application of a company that claimed to be entitled to fees for assisting in the negotiation of the transaction that saw Malabu receive the $1,092,040,00 indirectly from Shell and Eni. This was paid into court the following month, and in a judgment delivered in July 2013, $110.5 million was awarded to the company, with the balance to be returned to Malabu.

FULL ARTICLE

SEE ALSO: SHELL DEFAMATION CASE HAS PROFOUND IMPLICATIONS

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