When Royal Dutch Shell was awarded sole control of a prized Nigerian offshore oil exploration licence called OPL 245 in 2002, there were hopes of a fresh start for international energy companies in Africa’s most crude-rich nation.
According to an oil industry journal at the time, the deal was designed to revive stalled exploration and production activity and “convince foreign industry players that the government is a reliable partner”. Fifteen years later, OPL 245 and its estimated 9bn barrels of oil are still undeveloped and it would be surprising if Shell was not bitterly regretting its involvement with an asset that has become a byword for opaque business practices in Nigeria.
A stash of Shell emails seized by Dutch investigators and leaked to news organisations, including the Financial Times, last week shed unflattering light on the company’s efforts to fend off a rival claim to OPL 245. The leaked documents forced the Anglo-Dutch energy group to admit that it had “engaged” with Dan Etete, a Nigerian politician and businessman behind a company called Malabu, which was awarded the rights to OPL 245 in 1998, when he was serving as oil minister.
A $1.3bn deal in 2011 under which Shell and Eni of Italy each received 50 per cent of OPL 245 was intended to end years of wrangling during which successive Nigerian governments handed the licence back and forth between Shell and Malabu. Instead, the agreement has ensnared Shell and Eni in corruption investigations in Nigeria, Italy and the Netherlands and left the future of one of Africa’s biggest undeveloped oilfields in as much doubt as ever.
It is, as one industry figure involved in the dispute admits, an “unholy mess”. Shell and Eni both deny they did anything illegal. The $1.3bn payment by the two companies in relation to OPL 245 was made to the Nigerian government, and both Shell and Eni say they had no involvement in what happened to the money subsequently. However, Shell acknowledged for the first time last week that it knew Malabu would be compensated for relinquishing its claim on OPL 245.
Anti-corruption campaigners see Shell’s admission as a smoking gun, and have seized on the leaked emails sent between senior company employees between 2008 and 2010 as evidence of bribery. One email claimed Mr Etete could “smell the money” as the 2011 deal neared. Other memos said Nigeria’s then-president Goodluck Jonathan was looking to receive a cut of the proceeds.
Mr Etete, who was convicted in France of money-laundering in a separate case in 2007, could not be reached for comment. Mr Jonathan has denied wrongdoing. “This is one of the worst corruption scandals the oil industry has ever seen,” says Simon Taylor of Global Witness, a campaign group. “The world’s fifth-biggest company knowingly entered into a corrupt deal that deprived the Nigerian people of over $1bn.” Shell said last week that if evidence ultimately proves that improper payments relating to OPL 245 were made by Malabu or others to government officials, “it is Shell’s position that none of those payments were made with its knowledge, authorisation or on its behalf.”
Some analysts say the OPL 245 deal involving Shell and Eni simply reflects the realities of doing business in Nigeria, where the ruling elite has long monopolised the spoils of the country’s natural resources. “In countries where corruption is pervasive, companies see themselves as ‘Damned if we do, damned if we don’t’ because there is a perception that if you don’t pay bribes, you don’t get the deal,” says Judith Tyson, a research fellow at the Overseas Development Institute, a UK think-tank. Selva Ozelli, a US-based international tax lawyer who specialises in transparency matters, says the OPL 245 saga highlights the need for stronger disclosure requirements around corporate payments to governments — and the folly of a recent vote by the US Congress to repeal such rules at the urging of President Donald Trump. Shell and Eni say they would welcome greater transparency in Nigeria and support the anti-corruption drive by the country’s current president, Muhammadu Buhari. That effort includes an investigation into OPL 245. Meanwhile in Italy, Shell and Eni are waiting to learn whether a judge will accept a request from a Milan prosecutor for the two companies and individuals — including Claudio Descalzi, chief executive of the Italian energy group — to face trial for alleged corruption.
A phone call tapped by Dutch investigators and leaked along with the emails last week revealed that Ben van Beurden, Shell chief executive, was worried the case might also face scrutiny from US law enforcement authorities.
For Nigeria, OPL 245 looks increasingly caught between the government’s anti-corruption agenda and the need to revive the oil industry. Nigerian oil output is forecast to decline sharply over the next decade because of a drop in investment since crude prices crashed in 2014. Political risks, including violence in the oil-producing Niger Delta region, have hit production and deepened the worst economic crisis the country has experienced in a quarter of a century. Eni, which has operational rights to OPL 245, says it wants to go ahead with the project but analysts argue that is unlikely as long as the asset is mired in litigation. Oluseun Onigbinde, co-founder of BudgIT, a civil society group, says OPL 245 should be forfeited by Eni and Shell. “Without adequate changes to the award of oil acreages, Nigerians will keep holding the short end of the stick,” he adds.
Andrew Ward and Maggie Fick, FT