Nigeria: OPL 245 - a Turning Point in Nigeria's Fight Against Oil Fraud

At no time has Nigeria seen a coalesce of forces to recover a looted fund from a single oil field transaction which has brought both international organisations working with local Non-Governmental Organizations (NGOs) and anti-graft agencies than the OPL 245 deal, writes CHIKA IZUORA.

There is an overwhelming evidence showing that Nigeria is heavily fleeced in the Oil Prospecting License (OPL) 245 deal deviously orchestrated in 2011 by two oil giants, the Italian ENI and Royal Dutch Shell in connivance with some high profile Nigerian government officials.

While litigation is ongoing in Milan, Italy against Shell and ENI over charges of bribery with respect to the deal, fresh facts have continued to surface showing how the terms of the agreement were secretly altered to compromise future interests of Nigeria beyond the initial payment in favour of the two multinationals oil companies.

Notwithstanding that the oil giants connived in the payment of $1.1 billion for the illegally negotiated oil block in 2011, their officials also knew the payment would go into private coffers. There are emerging facts to the effect that correspondences in the domains of Shell and ENI show that the multinational companies were alerted ahead by Nigerian civil servants that the transaction was deceptive and that the terms contains hiding clauses which ab-initio ought to have rendered the contract inappropriate.

LEADERSHIP reports that the OPL245 oil block spans some 2,000 square kilometres and located on the southern edge of the Niger Delta in excess of water depths of 1,200 meters and is unarguably one of the worst of Nigeria's questionable oil concessions with profile of huge revenue losses.

Investigations have since revealed negotiations leading to the contract violated established procurement process in Nigeria and also negated international standard of business transactions. Since the lid was blown off the dirty deal which gave the subsidiaries of ENI and Shell equal shares of the oil deal to the disadvantage of Nigeria, there have been accusations and counter-accusations between Nigerian officials and the multinational oil companies.

While avalanche of documents and evidences have clearly proven the culpability of corporate bodies and individuals, those indicted in the shoddy deal including officials of the oil giants are yet to be brought to justice. High profile Nigerians indicted including immediate past Attorney General and Minister of Justice, Mr. Mohammed Adoke have largely being evasive or at best indulge in recant.

The crux of the concern elicited by the controversial deal derives from the process of awarding the licence to ENI and Shell. The multinationals in concert with their collaborators deliberately concealed clauses that misled Nigerian state into ceding its rightful shares and by implication incur monumental losses in revenues that ought to accrue to the coffers of the country. At the expense of Nigeria, the deal gave the oil multinationals substantial percentage of the equity while Nigeria is left with a far cry from that recommended by the International Monetary Fund (IMF) for oil producing countries.

The oil multinationals indulged in wilful treachery by conniving with Nigerian officials who received bribes and gratifications in getting the government to sign on to the deal. The projected revenue that ought to accrue to Nigeria from the oil fields over the lifetime of the project but negotiated away has been estimated to the tune of $5.86bn.

With oil price in the region of $70 per barrel, it is further estimated the losses in revenue arising from the terms of the contract could be monumental for Nigeria.

Analysis based on information contain in the Resolution Agreements regarding OPL 245 which was signed in April 2011 and the Production Sharing Agreement (PSA) signed between ENI and Shell of 21 February 2012 show that the projected resource output upon which the subsisting agreement was based is inconsistent with established industry-standard reserve estimation techniques.

While ENI disclosed recoverable reserves of 560 million barrels, the terms of agreement did not capture unspecified volumes of natural gas. Emerging discoveries from the analysis reveal considering "additional exploration prospects and the anticipated contribution of natural gas sales, the actual economic benefits" from OPL 245 could be considerably higher than what was captured in the agreement.

Largely, the new discoveries on the OPL 245 based on the post evaluation analysis by Resources for Development Consulting further show that "the fiscal terms that emerged from the Resolution Agreement of 2011 and the PSA signed between ENI and Shell in 2012 are not consistent with the essence of a normal production sharing system". The analysis reveals amongst other inconsistencies of OPL 245 contract agreement thus:

The PSA signed in accordance with the Resolution Agreement is not an agreement between the NNPC and the contractor, as was the case with the 2003 PSC and would have been the case if Malabu had signed a contract based on the 2005 Model PSC. The PSA is an agreement between the two international oil companies Eni and Shell. In other contexts, this agreement could be called a Joint Venture Agreement or a Joint Operating Agreement.

Already, an Italian judge, Giusy Barbara, in the course of trying the case affirmed that both Shell and Eni were fully aware that their 2011 purchase of Nigeria's Oil Prospecting Lease (OPL 245) would result in corrupt payments to Nigerian politicians and officials.

Italy's Eni and Shell bought the OPL 245 offshore field for about 1.3 billion dollars from Malabu Oil and Gas Limited owned by a former Minister of Petroleum Resources, Mr. Dan Etete, in a deal that spawned one of the oil industry's largest corruption scandals.

It was alleged that about $1.1 billion of the money paid for the oil block was siphoned to agents and middlemen. The Milan judge made the comment in her written reasons for the 2018 September conviction of a Nigerian, Mr. Emeka Obi and Italian, Gianluca Di Nardo, both middlemen in the OPL 245 deal, for corruption. They were jailed for four years.

"The management of oil companies Eni and Shell were fully aware of the fact that part of the $1.092 billion paid would have been used to compensate Nigerian public officials who had a role in this matter and who were circling their prey like hungry sharks," Barbara said in her reasoning.

"It was not mere connivance, but a conscious adhesion to a predatory project damaging the Nigerian state," she added. She also said money was given to some Eni managers. Obi and Di Nardo have been tried separately from Eni and Shell, which also face corruption allegations over the same deal in a hearing that is expected to drag on for months.

But responding to the judge's remarks, Eni said it would analyse the remarks, noting that a fuller account of the facts and evidence surrounding the deal would emerge only from the main trial. The Italian company has previously denied any wrongdoing.

Under the deal, Eni and Shell jointly acquired the OPL 245 field from a company owned by former Nigerian oil minister Dan Etete who, the judge noted, had been put under investigation in 2003 in France for alleged money-laundering. Shell also said that neither Obi nor Di Nardo had worked for it, and that there was no basis to convict it or any of its former staff of alleged offences related to the oil deal.

Eni Chief Executive, Claudio Descalzi, and four ex-Shell managers, including former Shell's Head of Upstream, Malcolm Brinded, are also accused of international corruption in the main trial. They have all denied any wrongdoing.

In her explanation, judge Barbara alleged that Shell executives, including Brinded, had known that Etete would keep a part of the purchase price for himself and use the rest to "pay people," including Nigerian politicians and public officials who had helped him to take possession of the field in 1998.

The Human and environmental Development Agenda (HEDA), a local non-governmental organization is not letting go of this monumental fraud. HEDA determined to see justice done and the loot returned had engaged the Global Witness, Re:Common and The Corner House to carry out independent investigations and make new discoveries.

This is based on outcome of investigations by world-class oil experts at Resources for Development Consulting which further unearth useful facts pertaining to outstanding issues in the hideous oil prospecting contract projected at an estimated revenue loss of $6billion to Nigeria.

To further expand its partnership HEDA, last week organised a two day, Special Anti-Corruption Situation Room" during its Public Presentation Of New Expert Analysis Of OPL 245 Deal And High Level Training Of Stakeholders.

The training involved representatives of the Independent Corrupt Practices Commission, ICPC, Economic and Financial Crimes Commission, EFCC, the National Orientation Agency, NOA, the Media and key stakeholders in the oil and gas sector.

The training dwelt largely on how to sniff and get figures from proven oil reserves of any given field to arrive at an acceptable revenue accruable to government.

Dr. Don Hubert of Resources for Development, extensively covered grounds on, "Cash Flow Analysis and Government Revenue Forecasting" as well as Fiscal Terms Applicable To OPL 245. He also took participant through "Projects Inputs and Assumptions as well as " Summary of New Expert Analysis On Back-In-Rights in the Controversial OPL 245 Deal".

In his contribution, director asset recovery of ICPC, Yusuf Aliyu Mohammed called for stronger inter agency collaboration to deal will corrupt practices in the sector. He said, the agency is willing to cooperate with all stakeholders to transform the industry by ensuring that due process is followed in oil and gas procurement.

Also speaking, the director general of the National Orientation Agency, Garba Abari called for citizens action against corruption. He insists that unless Nigerians take the lead to protest looting of the economy in the public sector, development would continue to elude the country as money that should be ploughed into development usually end up in private pockets.

In his opening remarks, Olanrewaju Suraju, Chairman of HEDA, said that Nigeria could not be bound by OPL contract agreement considering new discoveries that have provided further insights into the rip off.

Suraju, said that the controversial terms on OPL 245 compromises Nigeria's potential revenue from the oil block considering that the contract is hugely at variance with terms on which Shell had been awarded license for the same oil block in 2003 put the revenue accruable to Nigeria in excess of US$4.5bn.

"We reiterate that the OPL 245 deal was essentially a Production Sharing Agreement" (PSA) between Shell and ENI subsidiaries to the exclusion of Nigeria and thus compromises Nigeria's right to equitable share.

The Nigerian government recently successfully recovered US$85million in proceeds of the deal from the UK. The Nigerian government has also issued a billion dollar civil claim against JP Morgan for its role as a banker to the deal. There is therefore the need for Nigerian government to diligently pursue ongoing litigation including taking the necessary steps to extradite indicted individuals to enhance the prosecution of the cases arising from the OPL 245 scam."

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