Shell and Eni’s Misadventures in Nigeria

In 2011, Shell and Eni paid US$1.1bn for one of West Africa’s largest oil fields, situated off the coast of Nigeria. The payment was equivalent to 80% of Nigeria’s proposed 2015 health budget, but the money did not benefit the country’s citizens. Instead it went to a company called Malabu Oil and Gas, which was secretly owned by the former oil minister who had granted his company rights to the oil field in 1998. Like many others, this deal for a massive state asset was conducted behind closed doors, without the knowledge of the public or investors.
Shell and Eni denied paying anyone other than the Nigerian government but there is clear evidence that they knew their payment would be diverted into private pockets. By doing business with corrupt politicians, Shell and Eni exposed their shareholders to enormous risk. The case is currently under investigation by authorities in the UK, Italy and Nigeria and there is a real chance the companies will lose their rights to the block, which is a critical plank in their strategy to replenish their reserves.

A hearing in London this month will determine whether some of the funds related to the deal will be unfrozen at the request of Malabu. This will test to the UK courts’ willingness to stand firm on preventing dirty money being laundered through the UK. It will also be an opportunity for the new reform-minded government of Nigeria to deal with a legacy of corruption from previous administrations.
The OPL 245 case provides a clear and compelling example of why laws mandating greater transparency over company ownership, and the payments companies make for oil, gas, and minerals, are needed. Laws requiring companies to disclose such payments already exist in draft form in the U.S., but Shell and other major oil firms including BP, Chevron and Exxon, are blocking their implementation. As OPL 245 shows, such obstructiveness goes against their own interests.
As the case of Nigeria’s missing billion shows, there is no moral or economic argument for doing these deals in secret. The tide is turning towards transparency, and companies like Shell should champion this rather than trying to protect a redundant and outdated business model.

globalwitness.org

Posted by admin on Dec 15 2015. Filed under African News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry