Malabu Scandal: Analysis shows Shell, Eni used Nigeria’s share to fund alleged bribery scheme
The terms replicated military-rule era “Sole Risk” contracts, and boosted Shell and Eni’s internal valuations of the oil deal enough to justify the companies paying $1.1bn upfront.
The award of military era style contracts for deep water fields to huge international oil companies appears to be unprecedented since the advent of civil government in Nigeria. The deal transferred massive economic benefits to the companies at the expense of the Nigerian people by giving away Nigeria’s right to its share of the oil produced, terms which resemble ‘Sole Risk’ contracts granted only to Nigerian companies during military rule in Nigeria’s Deep Water.
The analysis also found that the Nigerian state’s ability to buy their rights back was heavily restricted in the deal with Nigeria having to pay $650m plus interest up front to re-acquire a stake worth an estimated $2 billion in future revenue. These rights would still leave Nigeria with a far lower share of the oil production than recommended by the IMF, and 15 per cent or $3.5 billion lower than previous terms for the same license.
Emails between Shell managers at the time showed they were aware that the deal would not give Nigeria rights to the share of its oil that is usual in deals between country governments and international companies. The current Nigerian Attorney General, Abubakar Malami, reportedly suggested that Nigeria could reach a settlement with the companies with a deal including Nigeria re-acquiring a stake in OPL 245. President Buhari reportedly rejected any settlement, ordered a halt to development of the oil block until all issues are resolved and the legal process has run its course.
“Shell and Eni represented their OPL 245 contract as a production sharing system, yet it includes no sharing of production for Nigeria. This shockingly poor deal must be cancelled,” said Nick Hildyard of The Corner House.
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