New information suggests that the US$1.1 billion paid by Shell and the Italian energy company ENI for a Nigerian oil block could fall foul of anti-corruption legislation and highlights the urgent need for strong disclosure laws across the EU. A directive being discussed by the EU Council and Parliament must require full “project-by-project” disclosure to ensure such payments are publicly reported.



The payments made by Shell and ENI in 2011 relate to a disputed Nigerian oil block, OPL-245.[i] Though Shell and ENI paid the Nigerian government, funds were then transferred shortly after to a company controlled by ex-Oil Minister, Dan Etete, who in 2007 was convicted in France of money laundering. According to the current Nigerian Attorney General and Minister of Justice, Mr Mohammed Adoke, Shell and ENI were fully aware and in agreement that the money would then be transferred to Etete’s company, Malabu Oil & Gas. Earlier this year he stated, “SNUD [a subsidiary of Shell] and ENI agreed to pay Malabu through the Federal Government acting as an obligor the sum of US$1,092,040,000...”[ii] Malabu first obtained the oil block in 1998, in controversial circumstances when Etete himself was the Nigerian Oil Minister under the country’s then-leader General Abacha.



If indeed, as Attorney General Adoke suggests, Shell and ENI knew that the ultimate destination of the funds would be Malabu and Etete, then this transaction might well fall foul of anti-bribery legislation in the United Kingdom, the United States and Italy - for the reason that a substantial monetary ’reward’ ended up being paid to a company controlled by an individual, who had arguably abused his public position to obtain OPL-245 in opaque circumstances during the Abacha dictatorship. It would be surprising if Etete's history was not known to sophisticated international companies who, in Shell's case, have operated in Nigeria for more than half a century.



New information brought to the attention of Global Witness further suggests that Shell and ENI were party to negotiations that would ultimately involve the passing of payments on to Malabu. In a sworn affidavit given to a US Court, a consultant central to the Malabu deal[iii] described a process of discussion and negotiation between the parties to the deal, which commenced approximately in May 2009. He described the negotiations as having broken down by December 2010, but that he hoped they would re-start in January 2011. According to the affidavit, in late December 2010, he was then contacted by an ENI employee who told him that a “direct deal” with Malabu was no-longer possible.[iv]



The consultant then proposed a new arrangement to Etete: that the Nigerian Government pay Malabu from “…the compensation received from ENI AGIP/Shell.” The affidavit continued, “By the end of January 2011, ENI Agip / Shell came back with a proposal similar to the one that I had suggested to Etete in December […] despite the form of the transaction, the substance of the final outcome for Malabu was the same, as Malabu was to receive US$1.1 billion. […] At the end of March 2011, I met with Etete, he accepted the proposal, and I conveyed his acceptance to ENI AGIP/Shell.”[v]



Shell responded to detailed questions by Global Witness concerning the extent of their knowledge that funds paid would end up in Etete’s hands stating that it disagreed with the “premise behind the various statements in your letter.” It suggested that it had appealed to the International Centre for Settlement of Investment Disputes in order to address what it claimed was its dispute with the Nigerian Government over OPL-245. It stated that: “No payments were made by either NAE or SNEPCo [respectively, ENI and Shell subsidiaries in Nigeria] to Malabu Oil and Gas.”[vi] In its response to similar questions, ENI stated that “The relevant agreements have been executed by ENI and Shell only with the Federal Government [of Nigeria].” ENI also claimed that the payments for the block were made to the Nigerian Government.[vii]



Both these responses fail to address a key point: that both companies were aware that the payment of funds to the Federal Government of Nigeria to acquire OPL-245 would ultimately be paid over to Malabu Oil and Gas.



“Something really stinks here,” said Simon Taylor, Director of Global Witness. “On the one hand, we have Shell fighting an aggressive campaign to prevent new EU laws from mandating payment disclosure right down to the project-level.[viii] On the other, we can see that the company bought this project in Nigeria, together with ENI, with a payment that monetised an asset obtained by Abacha’s Oil Minister under dubious circumstances, worth hundreds of millions of dollars.” He continued, “Buying assets like this in such an opaque manner, where it is not possible for citizens to follow the money is clearly not in the interests of national development, and could potentially deprive the country of much-needed revenue.”



EU member states are meeting to consider proposals within the EU Transparency and Accounting Directives to mirror US legislation passed in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Provision 1504 of the Dodd-Frank Act, requires US-listed extractive companies to publish the payments they make to foreign governments for each country on a project-by-project basis. European law-makers must now follow the proposal from the European Parliament to define ‘project’ as activities governed by a single contract, license, lease, concession or similar legal agreement with a government upon which payment liabilities arise, in order to require disclosure of payments such as the one made for OPL 245.



“The litmus test for an EU directive is whether payments like that for OPL-245 would be reported. If not, then the Directive will be unfit-for-purpose, because project payments of this magnitude would continue to be aggregated and obscured, preventing citizens from knowing exactly what is being paid, for what, and to whom. If you don’t even know a payment exists, how can you follow the money?” said Taylor. EU lawmakers now have an opportunity – and a moral obligation – to ensure that citizens are no-longer kept in the dark about project-by-project payments.



Contact: Simon Taylor: Mob: +44 (0)7957 142 121, or Thomas Mayne: Landline: +44 (0)20 7492 5864, or Mob: +44 (0)7939 460357.



Global Witness investigates and campaigns to prevent natural resource-related conflict and corruption and associated environmental and human rights abuses.