Shell faces risks from $1.1bn Nigerian oil scandal

Shell’s role in a $1.1bn corruption scandal in Nigeria poses significant hidden risks for investors, the international non-governmental organisation, Global Witness, said at the company’s 2015 Annual General Meeting.

The warning comes as the oil major is lobbying the United Kingdom and United States authorities to undermine the implementation of new transparency laws, which will consign such secretive deals to history.

The corruption at the heart of the deal deprived the Nigerian state of over $1.1bn, triggered investigations by authorities in three countries and can potentially lead to Shell and its Italian partner, Eni, losing access to the oil block.

Global Witness, in a statement on Tuesday, noted that in 2011, Eni and Shell paid $1.1bn for Oil Prospecting Licence 245, one of the largest off the coast of Nigeria.

“The money should have ended up in state coffers, where it is badly needed – the amount in question is equivalent to two thirds of the Nigerian health care budget,” the NGO said.

Instead, the payment was made by Shell and Eni to the Nigerian government, who had a separate agreement to pay the same amount to Malabu Oil and Gas, a company controlled by a former oil minister, Chief Dan Etete, according to Global Witness.

It said as Etete had awarded the oil block to Malabu Oil and Gas while minister during the regime of the late Gen. Sani Abacha, he had effectively given himself one of the most lucrative oil blocks in the country.

The Director of Global Witness, Simon Taylor, was quoted in the statement as saying, “This is a billion dollar bombshell; Shell’s shareholders deserve to know the stakes. This deal is being investigated in several countries and could be cancelled altogether.

“Such shady deals expose investors to risks they do not know about, entrench corruption and rob people in countries like Nigeria of money they badly need for things like schools and hospitals. So why is Shell blocking laws that would bring such payments into the open? What else have they got to hide?”

While noting that Shell and Eni denied paying any money to Malabu Oil and Gas, Global Witness, however, said High Court proceedings and other evidences seen by it revealed that both firms were aware and in agreement that the deal was for the benefit of Malabu.

Global Witness stated, “If Shell and Eni’s claim that they purchased the oil block from the Nigerian government are true; then under the constitution, the $1.1bn should have been paid to the Nigerian government’s ‘Federation Account’. It was not.”