Connect with us
Advertise With Us

NEWS

Malabu Scandal: Nigeria Loses $6bn Revenue

Published

on


A new report by an anti-corruption group, Global Witness, yesterday revealed that Shell and Eni’s deal for Nigeria’s OPL 245 oil block reduced Nigeria’s expected revenue by nearly $6 billion.

Global Witness, a campaign group, said the shady deal involving two oil majors, Eni and Shell, has led to Nigeria losing an estimated $6 billion.

The group stated that the controversial OPL 245 deal in 2011 deprived Nigeria of double of its annual education and healthcare budget.

Eni and Shell are accused of knowing the money they paid to Nigeria would be used for bribes. However, the Italian and Anglo-Dutch energy giants deny any wrongdoing.

The unfolding scandal, which is playing out in an Italian court, involves former British intelligence officers (MI6), U.S. Federal Bureau of Investigation (FBI), a former president of Nigeria, as well as current and former senior executives at the two oil companies.

A former Nigerian oil minister, Dan Etete, was found guilty of money laundering by a court in France.

LEADERSHIP gathered that Global Witness spent years investigating the deal which gave Shell and Eni the rights to explore OPL 245, an offshore oil field in the Niger Delta.

After commissioning a new analysis of the way the contract was altered in favour of the energy companies, it concluded that Nigeria’s losses over the lifetime of the project would amount to $5.86bn, compared to terms in place before 2011. The estimated losses were calculated using an oil price of $70 a barrel as a basis.

The analysis was carried out by Resources for Development Consulting on behalf of Global Witness and other NGOs.

However, Eni has criticised the way it was calculated on the ground that it ignored the possibility that Nigeria had the right to revise the deal to claim a 50 per cent share of the production revenues.

“We discovered that Shell had constructed a deal that cut Nigeria out of their share of profit oil from the block,” Ava Lee, a campaigner at Global Witness told the BBC’s World Business Report.

“This amount of money would be enough to educate six million teachers in Nigeria. It really can’t be underestimated just how big a deal this could be for a country that right now has the highest rates of extreme poverty in the world”, he added.

Nigeria is the richest economy in Africa, but despite having large resources of oil and gas, tens of millions of people are poor.

It is understandable why Eni and Shell wanted to acquire the rights to develop OPL 245, because it is estimated to contain nine billion barrels of oil.

But the process of how they secured the contract is dogged by claims of corruption. The court in Milan is weighing evidence of how former Nigerian oil minister, Dan Etete, awarded ownership of OPL 245 to Malabu, a company he secretly controlled.

He is accused of paying bribes to others in the government, such as a former president, to ensure that the process went smoothly. Shell and Eni are accused of knowing the $1.1billion they paid to Nigeria would be used for bribes based on the content of emails which have since emerged.

“Looking at the emails, it seems that Shell knew that the deal they were constructing was misleading but they went ahead with it anyway even though a number of Nigerian officials raised concerns about this scandalous, scandalous deal,” said Ava Lee from Global Witness.

The Anglo-Dutch and Italian energy giants insist they have done nothing wrong, because they paid the money to secure the exploration rights directly to the Nigerian government.

Shell issued a statement to BBC World Business Report saying, “Since this matter is before the Tribunal of Milan it would not be appropriate for us to comment in detail. Issues that are under consideration as part of a trial process should be adjudicated in court and we do not wish to interfere with this process.

“We maintain that the settlement was a fully legal transaction and we believe the trial judges in Italy will conclude that there is no case against Shell or its former employees.”

Eni has also denied any wrongdoing and told the BBC that it questions the competence of the experts commissioned by Global Witness and its “partners”, even as it raised the possibility that the report by the campaign group was defamatory.

The Italian oil and Gas Company, in a statement, said, “As this matter is currently before the Tribunal of Milan, we are unable to comment in detail. Global Witness together with its partners Corner House, HEDA Resource Centre and Re: Common, had requested twice to be admitted as aggrieved parties in the Milan proceedings. On both occasions, the request was firmly denied by the Tribunal of Milan.”

Eni also said it “continues to reject any allegation of impropriety or irregularity in connection with this transaction”.

But campaigners believe this is a landmark case and the outcome of the trial in Milan will cause an earthquake to reverberate through the oil and gas industry.

They have urged President Muhammadu Buhari to intervene and cancel the deal.

Nick Hildyard of the Corner House said that “fund managers should be alarmed at this brazen dishonesty,” while another campaigner, Olanrewaju Suraju, from HEDA advised that “President Buhari should reject any deal.”

Oil Prices Steady After Friday’s Plunge

Meanwhile, oil prices steadied yesterday after plunging nearly eight per cent in the previous session, but remain under pressure with Brent crude below $60 per barrel amid weak fundamentals and struggling financial markets.

Front-month Brent crude oil futures were at $59.23 per barrel, up 43 cents, or 0.7 per cent, from their last close, while the US West Texas Intermediate, WTI, crude futures were up 11 cents, or 0.2 per cent, at $50.53 per barrel.

The gains did little to make up for Friday’s selloff which traders have already dubbed ‘Black Friday’.

Reacting to Friday’s falls in Brent and WTI, China’s Shanghai crude futures yesterday fell by five per cent, hitting their daily downside-limit. Greg McKenna, an Australian-based independent financial analyst, said there had been “utter capitulation in crude oil” markets.

The downward pressure comes from surging supply and a slowdown in demand growth which is expected to result in an oil supply overhang in 2019. Oil markets are also being affected by a downturn in wider financial markets.

“2018 clearly marked the end of the 10-year Asia credit bull market due to tightening financial conditions in Asia (especially China), and we expect this to remain the case in 2019,” Morgan Stanley said in a note released on Sunday.

“We don’t think that we are at the bottom of the cycle yet,” the US bank said.

Oil markets have also been weighed down by a strong US dollar, which has surged against most other currencies this year, thanks to rising interest rates that have pulled investor money out of other currencies and also assets like oil, which are seen as more risky than the greenback.

“Anything denominated against the USD is under pressure right now, said McKenna.

Another risk to global trade and overall economic growth is the trade war between the world’s two biggest economies, the United States and China.

“The US-China trade conflict poses a downside risk as we forecast the US to impose 25 per cent tariffs on all China imports by Q1 2019,” US bank J.P. Morgan said in a note published on Friday.



Copyright LEADERSHIP.
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from LEADERSHIP Nigeria Newspapers. Contact: editor@leadership.ng






Advertisement

You must be logged in to post a comment Login

MOST POPULAR