Court proceedings are due to begin in Italy today to determine whether oil giant Shell will face trial on corruption charges over the purchase of one of Africa’s most valuable oil blocks.
Italian prosecutors claim Shell and Italian oil major Eni concluded a deal for the rights to exploit the Nigerian deepwater oil block OPL 245 with knowledge that the money would fall into the hands of a convicted money-launderer and be turned into political kickbacks.
They are accusing Shell, Eni and several of Eni’s senior executives, including its CEO Claudio Descalzi, of corruption over the purchase of the block in 2011.
A preliminary hearing over the alleged offences is being held behind closed doors in Milan and is expected to last several weeks.
The case has been described by anti-corruption Global Witness as “one of the biggest scandals in the history of the oil sector” and as a warning to anyone in the oil and gas industry taking part in corruption practices.
It comes days after Shell was forced to admit it dealt with convicted money-launderer Dan Etete, a former oil minister, when sealing the deal with the Nigerian Government. This follows six years of Shell insisting it had dealt only with the Nigerian Government when making the deal.
In 2011, Shell and Eni paid the Nigerian Government $1.3bn (£1bn) for the rights to access the oil bloc, allegedly ending a longstanding dispute with Nigerian company Malabu Oil and Gas, who previously owned the rights to the oil field.
But prosecutors claim Shell and Eni gave $1.1bn (£858m) to Etete’s company Malabu, depriving the Nigerian people of a sum that is larger than the country’s 2016 healthcare budget, according to Global Witness.
The deepwater oil block off the Niger Delta known as OPL 245 is believed to hold an estimated nine billion barrels of oil and to be worth nearly half a trillion dollars at today’s price.
Access to the oil reportedly could increase Shell’s global oil reserves by a third and add two thirds to Eni’s reserves. In January, the Nigerian Government suspended the oil majors’ rights to the oil bloc in regards to the pending investigation.
The rights to this huge oil field were originally acquired by Etete’s Malabu company for a small sum in 1998, when he was oil minister. In 2007, Etete was convicted of money-laundering in a separate case in France.
But several investigations published over the last few weeks claim that Shell and Eni were aware that money was being handed over to Malabu.
What the Investigations Revealed
Internal emails obtained by Global Witness show that Shell’s top executives knew the money from the deal would be used to “pay off people” and flow into the pockets of some of the country’s most senior officials, including former president Goodluck Jonathan.
The emails also show Shell was negotiating the deal with Etete a year before it was signed. According to documents filed by prosecutors, $466m (£364m) were laundered through a network of bureaux de change in Nigeria and passed on to Jonathan and members of his government.
Eni and Descalzi have denied the charges and Shell previously said its employees had done nothing illegal. Etete has not responded to requests for comments but consistently denied any wrongdoing and a spokesman for Jonathan told the BBC the allegations were a “false narrative”.
These revelations follow DeSmog UK’s own investigation, which showed the UK’s foreign office agreed to lobby the Nigerian Government on behalf of Shell to protect its oil interests in the Niger Delta.
Oil campaigner for Global Witness Barnaby Pace told DeSmog UK: “Shell’s position claiming that they knew nothing was frankly unsustainable for them. It would not be surprising if they made a legal argument on the basis they admitted their involvement with Etete early rather than half way through a trial.
“Now that Shell has shifted its position, it puts them at odds with the position taken by Eni. Eni has been arguing that what happens with the money from the sale is not their responsibility and it’s nothing to do with them.”
A Shell spokesman told the BBC that Shell made repeated attempts “to fully establish and understand Malabu's ownership structure, including the exact role of Mr Etete in Malabu”.
“Over time it became clear to us that Etete was involved in Malabu and that the only way to resolve the impasse through a negotiated settlement was to engage with Etete and Malabu, whether we liked it or not. This was consistent with the Federal Government of Nigeria's (FGN) position.
“We believe that the settlement was a fully legal transaction with the FGN,” he said.
But documents obtained by BuzzFeed and Italian newspaper Il Sole 24 Ore reveal that Shell executives knew the deal would benefit Malabu by more than $1bn (£858m).
In an email from October 2010 between senior executives, executive board member Malcolm Brinded outlined details of the $1.3bn deal to secure OPL 245 and said it “has the advantage that Malabu gets well over $1bln”.
In another email circulated to senior executive, it is made clear that part of the money received by Etete would be used to “pay people off”.
Another email from a former MI6 officer employed by Shell, dated March 2010 and obtained by Global Witness, shows the company believed Etete would benefit from the deal.
It reads: “Etete can smell the money. If, at 70 years old, he does turn his nose up at 1.2 bill he is completely certifiable and we should then probably just hold out until nature takes its course with him.”
This email was forwarded to the then Shell chief executive Peter Voser, which shows that knowledge of Etete’s involvement were known from the very top.
The deal over the rights to OPL 245 was signed off by Voser and his Eni counterpart just months after Shell paid $30m (£23m) to settle previous claims of bribery in Nigeria and elsewhere.
At the time the deal went through, Shell was five months into a deferred prosecution agreement – the equivalent to being under probation – with the US Department of Justice.
A spokesman for Eni told BuzzFeed: “Eni and Shell are fully cooperating with the relevant authorities in Italy and in Nigeria. We shall continue to cooperate with relevant authorities in the investigations and continue to underscore the fact that ENI and its personnel have not been involved in any wrongdoing.”
Representatives of Peter Voser declined to comment.
Why does it matter? “Test Case”
The preliminary hearing starting today in Milan will see the courts having to decide whether to pursue criminal charges against Shell and Eni, which could then face trial in the Autumn.
The procedure is long and the outcome is not expected before the end of May 2017.
Prosecutors also confirmed they will seek charges against four senior Shell executives, including the current Shell Foundation Chairman Malcolm Brinded, who at the time of the deal was Shell’s head of Global Exploration and Production.
Speaking to DeSmog UK, Global Witness campaigner Pace, said the charges were “a test case”, which will send a strong warning to the oil and gas industry that it will be held accountable over corruption claims.
“This is important because senior executives of two of the world’s biggest companies are entering the first stage of a trial. It’s a big deal.
“I see this as very much as a test case. Whether innocent or guilty, this will make other oil and gas companies realise the consequences,” he said. “They are being held to account and the public will know about it. This has a deterrent effect.”
Photo: Shell via Flickr | CC 2.0