The British police are probing an allegation that the $1.3 billion Nigerian oil block deal involving Royal Dutch Shell and Italy's Eni SpA may have fuelled money laundering as most of the cash paid was allegedly paid to a company linked with a former Minister of Petroleum, Chief Dan Etete.
Global anti-corruption crusaders, who asked the British investigators to investigate the Oil Prospecting Licence (OPL) 245 deal, alleged that Shell and Eni used the federal government as a go-between to create the false impression that they were dealing with the government and not the former minister.
Located in the deep offshore waters of the Gulf of Guinea, the OPL 245 is estimated to hold at least nine billion barrels of crude reserves worth $1 trillion.
OPL 245 is an ultra-deep-water block off Nigeria and two discoveries in that block during the second half of the last decade suggested the area contains large oil reserves. In 1998, Etete awarded Malabu Oil and Gas, in which he is suspected to be the chief promoter, the rights to explore the block.
A spokeswoman for London's Metropolitan Police was quoted by Wall Street Journal (WSJ) to have confirmed investigation into the matter, adding that no charges and no arrests have been made, as the investigation is at an early stage.
Royal Dutch Shell and Eni have not been accused of wrongdoing in relation to the investigation, the WSJ reported.
The journal stated that details surrounding how the offshore block OPL 245 changed hands have drawn scrutiny from anti-corruption campaigners, who are pushing for greater transparency from resource companies in their dealings with foreign governments.
"The Metropolitan Police's Proceeds of Corruption Unit is investigating allegations of money laundering related to the oil block" the report quoted the unnamed police spokeswoman to have said.
The unit is responsible for investigating allegations of foreign politicians or officials laundering money through the U.K.
The dispute between Shell's Nigerian subsidiary and Malabu arose after the federal government revoked Malabu's licence to the block in 2001, following the death in 1998 of former Head of State, Gen. Sani Abacha.
In 2002, the administration of then President Olusegun Obasanjo awarded the exploration rights to the oil block to the Shell subsidiary.
This sparked an ownership dispute that lasted nearly a decade, leading in 2011 to a two-tiered deal.
According to the account of the transaction published in last week's judgment, Shell and its by-then-partner Eni paid the federal government $1.3 billion, including a $207 million signature bonus paid into a government account, in return for the right to operate OPL 245. A Shell subsidiary paid the signature bonus, and an Eni subsidiary paid the $1.1 billion balance.
The $1.1 billion was deposited in a London escrow account operated by J.P Morgan Chase & Co.
Separately, the Nigerian government agreed to pay Malabu $1.1 billion to waive all rights to the block.
Since then, payment disputes litigated between Etete and two middlemen have revealed many details of the deals that otherwise would have remained private, generating interest from anti-corruption groups. However, before the federal government's intervention in the matter, the ownership of the block had been a subject of litigations, spanning over 10 years.
While Shell and ENI insisted they bought the block from the federal government, the government claimed it merely resolved the ownership dispute over the oil block between Shell and Malabu.
The role of the federal government in the deal attracted the attention of the National Assembly which launched investigations into the transaction.
A committee set up by the House of Representatives to probe the transaction discovered that the deal did not follow due process and consequently recommended the revocation of the licence granted to Shell and Eni.
Specifically, the committee noted that the sale violated the law that guarantees increased Nigerian ownership of oil assets by giving foreign companies 100 per cent ownership as well as the country's tax regulations. The probe team also alleged a "lack of transparency and full disclosure" by Shell in acquiring the licence.
Etete had in his capacity as the minister of petroleum in the administration of the late Gen. Abacha in 1998 awarded OPL 245 for a payment of $2 million to Malabu, a company in which he allegedly had interest.
The late Abacha's son, Mohammed, and other close allies of the late head of state were also alleged to be shareholders in the company.
However, the deal was later cancelled after the death of Abacha by the Obasanjo administration, which considered the transaction as lacking transparency and due process.
Malabu was registered on April 24, 1998, five days before Etete awarded it OPL 245 and three months later, Abacha died.
The ownership of OPL 245 had been unclear since the government annulled the initial award to Malabu, and then awarded it first to Shell and then back to Malabu after a series of court cases.
Shell was still pursuing action to recover the block when it finally struck the deal to buy it with ENI in 2011 at the sum of $1.3 billion. The National Assembly, which also began investigating the deal last week to ascertain if the Attorney General of the Federation and Minister of Justice, Mr.
Mohammed Adoke (SAN), who helped settle the deal with ENI and Shell, had acted properly.
Adoke clarified that he was acting in the interests of all parties to facilitate a deal and end the long-running ownership dispute over the oil block.
He also said resolving the dispute would help the government attract investment into the oil and gas sector.
In a UK court case brought by Emeka Obi against Malabu for unpaid fees relating to his help in brokering the Shell/ENI deal, the judge in that case, Justice Elizabeth Gloster, concluded in her ruling last week that "from its incorporation and at all material times ... Etete had a substantial beneficial interest in Malabu."
Etete said he was only a consultant to the company, but he represented the company in the court case and in all negotiations with the oil majors, and he told the court he was the sole signatory to its accounts.
Documents relating to Obi's London case show that both Shell and ENI met several times with Etete to negotiate the deal. An email from a Shell employee to another middleman recounts how he met Etete for face-to-face negotiations over "lots of iced champagne".
Obi said in court that he approached ENI on Malabu's behalf on December 24, 2009 and introduced Etete to a representative of the Italian oil company to discuss the deal.
Global Witness campaigner Tom Mayne said: "It's obvious from the meetings Shell and ENI both had with Dan Etete that they knew he was the person to speak to and then agreed that the deal be structured in such a way that it went through the government."
The National Secretary of Zero Corruption Coalition, Mr. Babatunde Oluajo, told Reuters that his Nigerian campaign group had asked the UK government to look into the matter.
"In regard to our ... commitment to the fight against corruption in Nigeria ... we wish to ... formally request for a full investigation into the activities of ... companies and individuals in the procurement of the OPL 245 in Nigeria," a letter the group sent to the UK High Commissioner on July 5 read in part.
Though Malabu's original shareholders had been Abacha's son and allies - and Etete himself, according to the British judge in Obi's court case - the company secretary told the court he had lost all the documents showing who owned it now.
The WSJ stated that attempts to contact Etete were unsuccessful. "His law firm in the London case did not comment on his behalf and declined to pass on messages to him. Nigerian officials and anti-corruption campaigners did not know how to contact him," the report added.
Eni also declined to respond to inquiries from Reuters on the deal, but it had told shareholders earlier in May that the transaction was done with the federal government and not Malabu.
Located in the deep offshore waters of the Gulf of Guinea, the OPL 245 is estimated to hold at least nine billion barrels of crude reserves worth $1 trillion.
OPL 245 is an ultra-deep-water block off Nigeria and two discoveries in that block during the second half of the last decade suggested the area contains large oil reserves. In 1998, Etete awarded Malabu Oil and Gas, in which he is suspected to be the chief promoter, the rights to explore the block.
A spokeswoman for London's Metropolitan Police was quoted by Wall Street Journal (WSJ) to have confirmed investigation into the matter, adding that no charges and no arrests have been made, as the investigation is at an early stage.
Royal Dutch Shell and Eni have not been accused of wrongdoing in relation to the investigation, the WSJ reported.
The journal stated that details surrounding how the offshore block OPL 245 changed hands have drawn scrutiny from anti-corruption campaigners, who are pushing for greater transparency from resource companies in their dealings with foreign governments.
"The Metropolitan Police's Proceeds of Corruption Unit is investigating allegations of money laundering related to the oil block" the report quoted the unnamed police spokeswoman to have said.
The unit is responsible for investigating allegations of foreign politicians or officials laundering money through the U.K.
The dispute between Shell's Nigerian subsidiary and Malabu arose after the federal government revoked Malabu's licence to the block in 2001, following the death in 1998 of former Head of State, Gen. Sani Abacha.
In 2002, the administration of then President Olusegun Obasanjo awarded the exploration rights to the oil block to the Shell subsidiary.
This sparked an ownership dispute that lasted nearly a decade, leading in 2011 to a two-tiered deal.
According to the account of the transaction published in last week's judgment, Shell and its by-then-partner Eni paid the federal government $1.3 billion, including a $207 million signature bonus paid into a government account, in return for the right to operate OPL 245. A Shell subsidiary paid the signature bonus, and an Eni subsidiary paid the $1.1 billion balance.
The $1.1 billion was deposited in a London escrow account operated by J.P Morgan Chase & Co.
Separately, the Nigerian government agreed to pay Malabu $1.1 billion to waive all rights to the block.
Since then, payment disputes litigated between Etete and two middlemen have revealed many details of the deals that otherwise would have remained private, generating interest from anti-corruption groups. However, before the federal government's intervention in the matter, the ownership of the block had been a subject of litigations, spanning over 10 years.
While Shell and ENI insisted they bought the block from the federal government, the government claimed it merely resolved the ownership dispute over the oil block between Shell and Malabu.
The role of the federal government in the deal attracted the attention of the National Assembly which launched investigations into the transaction.
A committee set up by the House of Representatives to probe the transaction discovered that the deal did not follow due process and consequently recommended the revocation of the licence granted to Shell and Eni.
Specifically, the committee noted that the sale violated the law that guarantees increased Nigerian ownership of oil assets by giving foreign companies 100 per cent ownership as well as the country's tax regulations. The probe team also alleged a "lack of transparency and full disclosure" by Shell in acquiring the licence.
Etete had in his capacity as the minister of petroleum in the administration of the late Gen. Abacha in 1998 awarded OPL 245 for a payment of $2 million to Malabu, a company in which he allegedly had interest.
The late Abacha's son, Mohammed, and other close allies of the late head of state were also alleged to be shareholders in the company.
However, the deal was later cancelled after the death of Abacha by the Obasanjo administration, which considered the transaction as lacking transparency and due process.
Malabu was registered on April 24, 1998, five days before Etete awarded it OPL 245 and three months later, Abacha died.
The ownership of OPL 245 had been unclear since the government annulled the initial award to Malabu, and then awarded it first to Shell and then back to Malabu after a series of court cases.
Shell was still pursuing action to recover the block when it finally struck the deal to buy it with ENI in 2011 at the sum of $1.3 billion. The National Assembly, which also began investigating the deal last week to ascertain if the Attorney General of the Federation and Minister of Justice, Mr.
Mohammed Adoke (SAN), who helped settle the deal with ENI and Shell, had acted properly.
Adoke clarified that he was acting in the interests of all parties to facilitate a deal and end the long-running ownership dispute over the oil block.
He also said resolving the dispute would help the government attract investment into the oil and gas sector.
In a UK court case brought by Emeka Obi against Malabu for unpaid fees relating to his help in brokering the Shell/ENI deal, the judge in that case, Justice Elizabeth Gloster, concluded in her ruling last week that "from its incorporation and at all material times ... Etete had a substantial beneficial interest in Malabu."
Etete said he was only a consultant to the company, but he represented the company in the court case and in all negotiations with the oil majors, and he told the court he was the sole signatory to its accounts.
Documents relating to Obi's London case show that both Shell and ENI met several times with Etete to negotiate the deal. An email from a Shell employee to another middleman recounts how he met Etete for face-to-face negotiations over "lots of iced champagne".
Obi said in court that he approached ENI on Malabu's behalf on December 24, 2009 and introduced Etete to a representative of the Italian oil company to discuss the deal.
Global Witness campaigner Tom Mayne said: "It's obvious from the meetings Shell and ENI both had with Dan Etete that they knew he was the person to speak to and then agreed that the deal be structured in such a way that it went through the government."
The National Secretary of Zero Corruption Coalition, Mr. Babatunde Oluajo, told Reuters that his Nigerian campaign group had asked the UK government to look into the matter.
"In regard to our ... commitment to the fight against corruption in Nigeria ... we wish to ... formally request for a full investigation into the activities of ... companies and individuals in the procurement of the OPL 245 in Nigeria," a letter the group sent to the UK High Commissioner on July 5 read in part.
Though Malabu's original shareholders had been Abacha's son and allies - and Etete himself, according to the British judge in Obi's court case - the company secretary told the court he had lost all the documents showing who owned it now.
The WSJ stated that attempts to contact Etete were unsuccessful. "His law firm in the London case did not comment on his behalf and declined to pass on messages to him. Nigerian officials and anti-corruption campaigners did not know how to contact him," the report added.
Eni also declined to respond to inquiries from Reuters on the deal, but it had told shareholders earlier in May that the transaction was done with the federal government and not Malabu.
