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Italy probes Shell over corruption allegations in Malabu oil deal

By The Rainbow
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Italian prosecutors have commenced investigation into the corruption allegation over the Malabu offshore oil block (OPL 245) bought by Shell and Eni from Nigeria for $1.3bn, according to

report by Reuters indicated that notice of proceedings had been initiated by the Public Prosecutor in Italy.

A report by National Mirror citing Reuters  said it was also confirmed that Shell was under investigation by Milan-based judges for alleged international corruption. A top official of the British oil company, Shell, was quoted Wednesday as saying that the company “is cooperating with the authorities and is looking into the allegations, which it takes seriously,” and that it “attaches the greatest importance to business integrity, one of our core values,”

The report claimed that reliable sources had indicated that  Italian prosecutors are said to be working closely with an anti-fraud team in the Netherlands in order to determine whether the two oil companies paid bribes to obtain licences for the Nigerian oil block The OPL 245 block, which has been at the centre of a series of long-standing disputes, was initially awarded in 1998 by former Nigerian oil minister, Dan Etete, to Malabu Oil and Gas, a company in which he holds substantial shares.

The field was later sold in 2011 to Eni and Shell. Shell, which sold some Nigerian assets in 2015, has been active in the country since 1937. According to documents from a British court, Malabu Oil received $1.09bn from the sale of the oil block which is estimated to have up to nine billion barrels of crude oil, while the rest went to the Nigerian government. Royal Dutch Shell's headquarters in the Hague was reportedly searched last month by Dutch police and prosecutors as part of this new strand of investigations. It would be recalled that in 2014 a Milan court had placed Eni under investigation over the $1.3bn (about 901m pounds) purchase in 2011 of Nigeria's OPL-245 offshore oil block by the Italian major and Shell. Prosecutors later expanded the scope of their investigation to include Eni Chief Executive, Claudio Descalzi. While the state-controlled oil company and its CEO denied any wrongdoing, the former has insisted that it dealt exclusively with the government of Nigeria, paid fees into a government account and did not use intermediaries for the transaction.

Prior to the latest investigations by Italian prosecutors, the oil block and the transactions on it had been subject of public discourse both in Nigeria and other countries, including efforts by the Federal Government a few weeks ago to get more details about the controversial deal.

For instance, Economic and Financial Crimes Commission, EFCC, recently re-opened investigations into the scandal and invited the immediate past Attorney General of the Federation, Mohammed Adoke, to explain his role in the alleged transfer of about $1.1bn to Malabu Oil and Gas Limited for the sale of oil block OPL 245. Rather than honouring the anti-graft agency's invitation promptly, Adoke, in a letter to the Vice President Yemi Osinbajo, dated December 31, 2015, claimed he acted in the best interest of the country and accused some top politicians and online media as orchestrating smear campaign against him.

Adoke stated that Oil Prospecting License (OPL) 245 was granted to Malabu Oil and Gas Limited by the administration of late General Sani Abacha, in 1998 and was subsequently revoked by the administration of President Olusegun Obasanjo, in 2001and re-allocated to Shell Nigeria Ultra Deep Limited (SNUD) in 2002 under a Production Sharing Contract (PSC) arrangement.

He explained that Malabu, who felt aggrieved by the unilateral revocation of the contract, petitioned the House of Representatives Committee on Petroleum and after a public hearing, the House recommended that the block be restored to the oil company. He added that Malabu also sued the government and SNUD claiming several declaratory reliefs including an order setting aside the re-allocation to SNUD and a restoration of the block to Malabu.

“The suit was struck out but on appeal, the parties entered into a settlement dated 30th November 2006, which were executed by my predecessor in office, Chief Bayo Ojo,” he added. He said a key term of the settlement was the restoration of Oil block 245 to Malabu by the government even as he maintained that pursuant to the Terms of Settlement, President Obasanjo in 2006 rescinded his earlier revocation and restored the Oil block 245 to Malabu but not before SNUD had already “expended huge resources of over $500m to de-risk the oil block under the existing arrangement with the government and had found oil in commercial quantities.

The Mail of London had reported in 2014 that the case had been a setback for the government of Prime Minister Matteo Renzi, because Italy’s 39-year-old leader hand-picked company veteran Descalzi to run Eni as part of a management overhaul at the country’s state-controlled companies. Renzi had publicly supported Descalzi and said no conclusions should be drawn before the investigation is completed.

Eni and Royal Dutch Shell bought the rights to the OPL 245 offshore oil licence block from the Nigerian government in 2011.

Production from the deepwater oil field is expected to begin in 2016 with the field estimated to hold up to 9.23 billion barrels of crude, equivalent to nearly a quarter of the country’s total proven reserves, according to industry figures.

An aide to Renzi had told Reuters the case involving Eni, which is Italy’s biggest company by market capitalisation and the state’s biggest asset, was “not a big cause for concern at the moment.”

As part of their investigation back in 2014, the Italian prosecutors in May asked the UK’s CPS to freeze $85 million in assets related to a Nigerian company, Malabu Oil & Gas, that prosecutors say was involved in the sale, according to a copy of the official request sent by the Milan investigators and seen by Reuters.

In the letter, the Italian prosecutors alleged that Scaroni and Descalzi oversaw the payments to parties who helped secure the sale. In a second letter they alleged that some of the ultimate recipients of alleged bribes used the money to buy aircraft and armoured cars.

“We are investigating many money transfers to many people in various countries who received sums that vary from millions of dollars to thousands of dollars,” the prosecutors had said in the follow-up letter, seen by Reuters.

ubject of dispute. It was first awarded a decade ago by military dictator Sani Abacha to Malabu Oil & Gas for a publicly-stated $20 million.

After the death of Abacha, a new Nigerian government annulled the deal. Malabu’s licence was reinstated in 2006.

– with online reports