OPL 245 and Nigeria’s $10bn loss

The alarm raised last week by the House of Representatives that Nigeria may have lost up to $10 billion in the controversial Malabu oil deal in one transaction on Operating Licence 245 calls for urgent scrutiny with a view to bring culprits to book. This is more so considering Thursday conviction of a Nigerian man and his accomplice in Italy to four years each for their roles in the oil deal, marking the first victory for Italian prosecutors in the complex corruption case.

The Chairman, House of Representatives Committee on Financial Crimes, Kayode Oladele, said last Wednesday in Abuja that available data indicated that the deal was never in the interest of the country.

He spoke at the anti-corruption situation room on public presentation of expert analysis of OPL 245 deal by Human and Environmental Development Agenda in partnership with Resources for Development Center, Canada; Global Witness, Re:Common and CornerHouse.

According to him, outcome of various studies from oil industry experts projected loss to the country at $4.5 billion, $6 billion, $9.8 billion and $10 billion based on lopsided Production Sharing Contracts that excluded some key components of the license like gas.

He said investigations were reinforced by the discovery that $1.1 billion was paid by Shell and Agip for OPL 245 disguised as payment to the federal government.

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He said this happened despite common knowledge that the only entitlement of the federal government in the award of oil bloc was a signature bonus while the beneficiary of the award (in this case Malabu) was entitled to the full value of the block ($1.1 billion) if it divests its stake.

He said, “It is shocking to note, based on your expert analysis report, that information contained in the Resolution Agreements regarding OPL 245 which was signed in April 2011 and the Production Sharing Agreement (PSA) signed between Eni and Shell of 21 February 2012, projected resource output upon which the subsisting agreement was based is inconsistent with established industry-standard reserve estimation techniques.

“The new discoveries on the OPL 245, based on your evaluation analysis, further show that the fiscal terms that emerged from the Resolution Agreement of 2011 and the PSA signed between Eni and Shell in 2012 are not consistent with the essence of a normal production sharing system”.

Don Hubert, who presented the Global Witness, Re:Common and CornerHouse report put the projected loss at $4.5 billion. He emphasised that the various figures should not be the focus but the fact that Nigeria was losing a huge chunk of what supposed to accrue to her.

The HEDA’s Director, Olanrewaju Suraj, urged the federal government to revoke the licence because the country stood to lose more if it retained the deal. He also noted that the cost of gas was not factored into the agreement.

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“The cost of gas would be around $4 billion if it were factored into the agreement by the 2011/2012 PSA made no provision that. So, when we add that to the initial loss of $6 billion, the country would have lost $10bn when the gas component is added.”

OPL 245 or the Malabu oil deal, which was struck in 2011 under President Goodluck Jonathan, saw the Nigerian government stand as a negotiator in the controversial sale of OPL 245 oil block in offshore Nigerian waters.

Two international oil and gas giants, Royal Dutch Shell and Italian Agip-Eni, paid out about $1.1 billion to Dan Etete, a former Nigerian petroleum minister, who had previously been convicted of money laundering in France.

The payout immediately became a subject of cross-border investigation spanning over six countries. Several Nigerian government officials were believed to have received several million dollars in bribes for the enabling roles they played.

Emeka Obi, a Nigerian consultant in England, and Gianluca Di Nardo, an Italian, stood as middlemen in connecting the parties and the transfer of the funds through international bank accounts. They were found guilty and sentenced four years each on Thursday and another £100 pounds confiscated in connection with the case.

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However, an international oil industry analyst, Dr Alexander Richards, has insisted that Nigeria is not losing any earnings from the sale of OPL 245 to the Shell/Eni consortium by the NNPC/Federal Government because production is yet to commence from the oil block as the first production yield will be in 2022.

He said at a press conference by the Anti-Corruption Situation Room in Abuja last week that there is also provision for a back-in right in the sales agreement that favours the federal government and the NNPC which enables them to earn back 50 percent on oil sharing. He cautioned against deliberately disparaging the transactions and contractual agreements considering the implications of pushing for cancellation including adverse impact on foreign direct investment and unavoidable international litigations.

Blueprint calls for a thorough investigation of the Malabu oil deal in order to ascertain the veracity or otherwise of allegation of $10 billion loss to Nigeria. The conviction of a Nigerian and accomplice in deal in Italy last week should serve as a barometer in Nigeria’s review of the deal. This is a hard nut the Buhari administration’s anti-corruption crusade must crack.


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