Royal Dutch Shell Plc  .com Rotating Header Image

Consultant faults Eni, Shells valuation of OPL 245

A consultant who stood as witness before an Italian court in Milan on Thursday faulted the valuation of the controversial Oil Prospecting License 245 by oil giants Eni and Shell.

Stephen Rogers appeared before an Italian court Thursday morning as expert witness for Nigeria and 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.

The Malabu scandal involved the transfer of about $1.1 billion by Shell and ENI through the Nigerian government to accounts controlled by a former Nigerian petroleum minister, Dan Etete.

From accounts controlled by Mr Etete, about half the money ($520 million) went to accounts of companies controlled by Mr Aliyu, popularly known in Nigeria as the owner of AA oil. Anti-corruption investigators and activists suspect he fronted for top officials of the Jonathan administration as well of officials of Shell and ENI.

Earlier on Wednesday, a lecturer at the University of Lagos, Dayo Ayoade, told the Milan court that the award of the controversial oil block to Shell and ENI was illegal.

Speaking on Thursday, Mr Rogers raised concerns about the valuation of the oil block by the two oil giants.

He explained that he adopted a three prong approach to valuing the OPL 245 license which included an industry standard discounted cash flow analysis, examination of Shell and Eni’s valuation at the time of the deal and the use of price paid per barrel in comparable deals at the time.

He also set out how he worked out all the likely revenues for producing the oil from block 245, determined a price for the oil and gas and worked out the costs for developing and producing the oil and gas.

Higher Value

According to Barnaby Pace of Global Witness, who was at the Italian court, Mr Roger’s economic analysis found that the market value of OPL 245 was $3.511 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 $4.543 billion. 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 values of gas, which Eni’s expert didn’t include, at $167 million.

In the run up to the deal, Shell and Eni valued the block in 2010 and 2011 respectively at $3.268 billion ($80 per barrel) and $3.540 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 $2.623 billion – $3.700 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.

PREMIUM TIMES gathered that there were no questions on ccross-examination from the prosecutor.

In a follow-up submission, the President of the Court said that at the next hearing, the defendants will have to finalise their list of witnesses to take the stand.

It is expected that the next hearing will have Eni’s expert witness on valuation, the first of five experts witnesses they intend to call.

Last month, a principal suspect in the controversy, Abubakar Aliyu, appeared as a witness before the court in Italy.

Mr Aliyu allegedly acted as a “middleman” for top officials of former President Goodluck Jonathan’s administration in the long-running controversy. Mr Abubakar however told the court his lawyers would need more time look into the allegations.

Mr Aliyu’s trial in Nigeria is being stalled because Nigeria’s anti-graft agency said he and other principal suspects have been on the run. Others are Mohammed Adoke, a former Attorney General and Minister of Justice, and Dan Etete, a former Minister of Petroleum.

They are being prosecuted alongside Shell Nigeria Exploration Production Company, and ENI, as well as Malabu Oil & Gas Ltd, Rocky Top Resource Ltd, Imperial Union Ltd, Novel Properties & Dev. Co. Ltd, Group Construction Ltd, and Megatech Engineering Ltd.


This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.