Nigeria risks losing $6b to bad oil deal, experts warn

•Eni, Shell deny wrongdoing

Nigeria will lose an estimated $6billion following the controversial 2011 deep water block Oil Prospecting Licence (OPL) 245 deal with Shell and Italian energy giant Eni, industry experts warned yesterday.

An analysis presented in Lagos by Resources for Development Consulting found that in the contract, commonly referred to as the Malabu deal, Nigeria is cheated of billions of dollars in revenue from two out of three regular sources.

The firm noted that the deal excluded Shell and Eni from paying royalty and Profit Oil on the OPL 245 which were part of the fiscal terms contained in earlier contractual agreements with the oil companies in 2003 and 2005.

The investigation was commissioned by non-governmental organisations (NGOs) Global Witness, Human and Environmental Development Agency (HEDA), RE: Common and The Corner House.

They urged the Federal Government to revoke the deal.

OPL 245 has about nine billion barrels of crude oil, estimated to be worth half a trillion dollars.

According to Resources for Development Consulting President, Dr Don Hubert, the fiscal terms governing the OPL 245 deal favoured only Shell and Eni.

Using a discounted cash flow analysis model made up of elements, including fiscal terms, field data from various sources, an oil price assumption of $70 a barrel, the firm projected that Nigeria lost at least $4.5 billion based on 2003 fiscal terms on the deal.

It said the Federal Government lost $5.86 billion over the lifetime of the project, based on 2005 fiscal terms.

Hubert said: “The payment of $1.1 billion dollars in 2011 was not only a payment to secure rights to OPL 245, the payment also served fiscal terms that were highly generous to the IOCs (International Oil Companies)but were highly detrimental to the government of Nigeria.

“The lack of profit oil in the current fiscal terms that is governing OPL 245 will result, our analysis shows, in a loss to the Nigerian people of at least $4.5 billion.”

Barnaby Pace from Global Witness said: “Today’s report shows how the terms of agreement was in their favour… Globally, there is call on the Nigerian government to revoke the licence so that its estimated $6 billion losses will be stopped in its track. We also call for contracts to be made public.”

Olanrewaju Suraj, chairman at HEDA, said: “The crux of the concern elicited by the controversial deal derives from the process of awarding the licence to ENI and Shell.

“The multinationals included clauses depriving the Nigerian state of its rightful share of oil production and, by implication, incur monumental losses in revenues that ought to accrue to the coffers of the country.

“It is estimated that with oil prices in the region of $70 per barrel, potential revenues that were negotiated away could amount to $5.86 billion.

“There is therefore a need for Nigerian government to diligently pursue ongoing litigation, including taking necessary steps to enhance the prosecution of the cases arising from the OPL 245 scam and to cancel this scandalous deal.”

Reacting to the analysis by Global Witness, Eni and Shell denied any wrongdoing.

Erika Mandraffino, Eni’s senior vice president, Global Media Relations and Crisis Communication, queried the methodology of the analysis.

“We note that Global Witness draws conclusions on the appropriateness of Eni’s and its partner’s transaction and on the legitimacy of Eni’s conduct by referring to analyses carried out by unnamed partners whose competence or expertise is not substantiated in your letter,” Mandraffino wrote.

“We can understand that your organisation, which is not engaged in business activities in the oil and gas sector, may not be best placed to assess the input, methodology and overall quality of such analyses and come to incorrect conclusions. In this respect, let us just note that the technical and contractual assumptions adopted as basis for the analysis appear to be partial and inaccurate, if not misleading.”

The sale of the block, which is considered as one of the most lucrative in Africa, has been replete with allegations and lawsuits.

Several former Shell executives and current and former Eni executives as well as the two companies, are on trial in Milan, Italy over the purchase of rights to the block.

Two middlemen in the deal, a Nigerian, Emeka Obi and an Italian, Gianluca Di Nardo, were convicted of corruption in September and a judge ordered the seizure of more than £93.6m from the pair.

On April 14, the Federal High Court in Abuja held that immediate-past Minister of Justice and Attorney-General of the Federation (AGF), Mr. Mohammed Adoke (SAN), could not be held liable for his roles in transactions concerning the deal.

The Economic and Financial Crimes Commission (EFCC) had charged Adoke with various offences involving his alleged roles in the transactions in which Nigeria was said to have been defrauded of about $1.8bn.

Delivering the judgment in the suit filed by Adoke against the incumbent AGF, Mr. Abubakar Malami (SAN), Justice Binta Nyako held that since Adoke only executed the lawful directives/approvals of the then President Goodluck Jonathan, the former minister was free of any liability for his roles in the deal.