Shell-Eni oil block deal may result in $5.86bn loss for Nigeria

27 November 2018 (Last Updated November 27th, 2018 11:41)

A scandal-plagued deal clinched by oil giants Shell and Eni for a promising oil block in Nigeria could reduce government revenues by $5.86bn over the lifetime of the project, according to a new report by international anti-corruption campaigner Global Witness.

Shell-Eni oil block deal may result in $5.86bn loss for Nigeria
Shell and Eni secured the OPL 245 offshore oil block in 2011. Credit: wsquared photography & creative.

A scandal-plagued deal clinched by oil giants Shell and Eni for a promising oil block in Nigeria could reduce government revenues by $5.86bn over the lifetime of the project, according to a new report by international anti-corruption campaigner Global Witness.

The deal has suffered over charges of corruption and the process through which the OPL 245 offshore oil block in the Niger Delta was secured in 2011.

The companies are facing trial in an Italian court over allegations of paying bribes to secure the oil block.

It has been alleged that the companies were fully aware that an initial $1.1bn payment made to the government would eventually go into the hands of individuals, including Nigerian oil minister Dan Etete, who was previously convicted of money laundering.

The potential losses to the exchequer have been calculated on the basis of an analysis conducted by oil experts at Resources for Development Consulting, a consultancy specialising in economic analysis of petroleum and mining projects. The company was recruited by Global Witness and NGOs HEDA, RE:Common, and The Corner House.

“The technical and contractual assumptions adopted as the basis for the analysis appear to be partial and inaccurate, if not misleading.”

Global Witness has accused the oil firms of altering the terms of the contract in their favour. Based on an oil price of $70 a barrel, the Nigerian Government could stand to lose projected revenues of $5.86bn when compared to the terms that had applied before the 2011 deal.

The organisation has called for the cancellation of the deal on the grounds that it is detrimental to national interests.

Responding to the report, Shell said: “Issues that are under consideration as part of a trial process should be adjudicated in court. We maintain there is no basis on which to convict Shell or any of its former employees.”

Meanwhile, Eni denied the allegations of wrongdoing and any mala fide intent in the way in which the company secured the contract.

In a statement, Eni said: “The technical and contractual assumptions adopted as the basis for the analysis appear to be partial and inaccurate, if not misleading.”

It was previously reported that Dan Etete used his influence in the government, in what is seen as an abuse of his official position, to award the OPL 245 to Malabu, a company that he secretly owned.