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I would like to share with you the history of Shell’s involvement in Oil Prospecting Licence (OPL) 245 offshore Nigeria. There has been a lot of media coverage recently on OPL 245 but the focus has been on the 2011 settlement and not the history and events leading up to the settlement. I will take you through a summary of facts and events relating to Shell’s involvement. Given that this matter is currently under investigation by various authorities, I will not comment on the specifics and regret that I cannot answer any questions on this today. However, I hope the information I share will help to clarify why certain Shell companies entered into the 2011 settlement and why we believe there has been no inappropriate conduct by any Shell company or its staff in this matter.

The history of block OPL 245 involves a series of complex transactions and disputes over 10 years among the Federal Government of Nigeria, Nigerian National Petroleum Corporation (NNPC), Malabu Oil and Gas Ltd. (Malabu) and a number of subsidiaries of Royal Dutch Shell. We can divide these transactions and disputes roughly into 4 phases, starting in 1998: when the then Minister of Petroleum Resources, Dan Etete, allocated OPL 245 to Malabu. Etete left office later that year. In late 2000, Malabu approached SNEPCO, offering to sell an interest in the block. There were rumours about the involvement of Dan Etete and a relative of former President Sani Abacha in Malabu but these could not be verified. We therefore obtained written representations from the registered shareholders of Malabu that they were the only two shareholders of Malabu and that Etete and Abacha had no ownership of Malabu. We also obtained assurances from the Nigerian Government that it had no intention to revoke the block from Malabu and that it consented to Shell Nigeria Ultra Deep (or “SNUD”) acquiring a 40% interest in the Block. SNUD signed agreements in March 2001.

In the second phase, in June 2001, the Nigerian Government revoked the licence from Malabu. The Nigerian Government then invited SNUD to participate in a competitive tender for the Block and SNUD was awarded the Block in May 2002. SNUD negotiated a Production Sharing Agreement with NNPC, which was the licence holder. It was signed in December 2003. Malabu was not involved and was not a party to this agreement. A signature bonus of $210mln was due, however by then various disputes had arisen, as I will describe in the next slide. So we agreed with the Nigerian Government that only $1mln was payable immediately and the rest would be placed in escrow until all disputes were resolved. We placed it in an escrow account with JP Morgan, and, as disputes continued, it remained there until 2011. In May 2002, SNUD commenced International Chamber of Commerce arbitration proceedings against Malabu. In November 2004, the ICC panel found in favour of SNUD. It noted that the actions of the Nigerian Government in revoking the Malabu licence were lawful. It decided that SNUD did not procure the wrongful revocation of Malabu’s licence and it also decided that the subsequent bidding process was lawful. In August 2002, Malabu commenced proceedings in New York federal court against the Nigerian Government, SNEPCO, SNUD, and other Shell parties. In May 2003 and following a petition by Malabu, the Nigerian House of Representatives issued a report in favour of Malabu. It concluded that OPL 245 was legally awarded to Malabu, that the revocation of Malabu’s licence should be set aside, and finally that SNUD should pay $550 million dollars compensation to Malabu. SNUD appealed these findings to the Court of Appeal in Abuja. Shortly afterwards, in September 2003, Malabu commenced proceedings in Nigeria against the Nigerian Government, NNPC, and SNUD for a declaration that the award of OPL 245 to Malabu was valid, a declaration that the award to SNUD was invalid, and for damages of $100 million dollars.

The 3rd Phase of this history started in 2006 when, out of the blue, the Nigerian Government advised that it had settled its legal cases with Malabu by reallocating OPL 245 to Malabu. This meant that the Nigerian Government had, in fact, awarded the Block to two different parties, SNUD and Malabu. These competing legal claims are central to the disputes that followed and to the 2011 settlement. Given the exploration investment made by SNUD to date, SNUD held urgent meetings with the Nigerian Government and Malabu. By April 2007, no progress was made and so SNUD commenced Bilteral Investment Treaty arbitration, where SNUD claimed wrongful expropriation of OPL 245 by the Nigerian Government. During 2008, the Nigerian Government urged the parties to find a solution and we began to explore possible settlement with the Government and Malabu. Our objective was to enable the development of OPL 245, which had stalled. Talks occurred involving the Nigerian Government and Malabu over the ensuing 2 years, at times with the participation of Dan Etete, but no settlement was agreed. As negotiations continued, in June 2010, the Nigerian Government issued a letter re-confirming its 2006 allocation of OPL 245 to Malabu. Factually, it was very clear to us that the outstanding dispute could not be settled without Malabu being involved. The Nigerian Government needed to be part of the settlement. It was the appropriate governing authority. It had issued rights to the Block to both SNUD and Malabu. SNUD and the Government were in arbitration proceedings with a great deal at stake for both sides. The Government was also in a position to reach settlement with Malabu and to deal with the risk of further disputes about the Block among Malabu and its various purported shareholders.

During Phase 4 Eni entered the negotiations as the potential purchaser of Malabu’s interest in the block. Negotiators for the Nigerian Government included the Attorney General, the Minister of Petroleum and the Minister of Finance. Negotiations led ultimately to the agreements that concluded in April 2011. In reaching this settlement, our objective was to move forward as co- owner of the block with Eni, free of further disputes with the Nigerian Government and Malabu, and to realise the investment already made in exploring this Block. To enable this, Malabu was required to give up its rights in the Block and for this it demanded compensation from the Nigerian Government, as it was the Government that had awarded the Block to Malabu. The key terms of the settlement are noted here. Contributions from Shell companies amounted to just under $320 Million dollars, including release of the signature bonus from the 2003 escrow. Eni contributed the remainder, a little over $980 Million dollars. In total the Nigerian Government received 1.3 billion dollars in return for allocation of the Block, settlement of claims on the block, and indemnification against future claims on the Block. This slide sets out the various agreements signed. I draw your attention particularly to two of these: The Nigerian Government signed a Resolution Agreement with Malabu, in which the Nigerian Government agreed to pay Malabu just under $1.1 Billion dollars and Malabu agreed to relinquish all claims on the Block. There was a submission to the Court of Appeal in Abuja withdrawing appeals by SNUD and SNEPCO against the findings of the 2003 House of Representatives Report. Malabu was party to that court case and this court document is the only document which Malabu and the Shell companies signed together. The settlement result is that Shell and Eni each own 50% of OPL 245; Eni is the development operator.

The Shell Group retained Debevoise & Plimpton LLP, a highly experienced international law firm, to look into the Shell companies’ involvement in the OPL 245 settlement. Debevoise conducted and led an investigation with support from Shell’s Business Integrity Department. Shell’s senior management, the Audit Committee and the RDS Board were briefed regularly during the conduct of the investigation. The findings were presented to the RDS Board in July 2016. During the second half of 2016, we voluntarily shared the investigative findings with relevant authorities, and we produced a voluminous set of documents, illustrating our cooperation with them.

Based on the Debevoise investigation and all other information and facts available to Shell, including review of the Prosecutor of Milan’s file, we do not believe that there is any basis to prosecute any Shell company. Furthermore, we are not aware of any basis for a case against any former or current Shell employee. Shell had no visibility into, or control over, what Malabu did with the compensation sums paid to it by FGN. If any improper payments were made by Malabu or others to then-current government officials, it is Shell’s position that no such payments were made with its knowledge or authorization, or on its behalf.



Shell admitted it knew payments would go to a convicted money launderer Dan Etete.

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One Comment

  1. Bill Campbell says:

    Chronology is important is it not!

    The international law firm reported to the RDS board in July 2016 but the emails confirming Shell knew money was going to individuals was not exposed till April 2017 a year later and was confirmed by the statement from the Shell spokesman to be an accepted fact in his 10th April 2017 press statement.

    So did the international law firm who we are to assume gave a positive message to the Board have no knowledge of these emails in 2016?

    Ching seems to be living in the world of alternative facts, his statements in the article above that Shell had no visibility into all this and payments were made without their prior knowledge or authorisation by Shell totally contradicts what RDS has already admitted on record in April this year.


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