Editorial: The Ghost of the Malabu Oil Deal

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It would appear the last is yet to be heard of the controversial Malabu oil deal, in which a whopping US$1.3 billion was paid in 2011 to Malabu Oil and Gas, an indigenous Nigerian company by the government under President Goodluck Jonathan. The EFCC has filed three separate charges against former attorney general of the federation Mohammed Adoke, former Petroleum minster, Dan Etete, and nine others, alleging impropriety over the sale of oil bloc OPL 245, which industry figures suggest could hold over 9.3 billion barrels of oil. The deal itself might not have been illegal. Nevertheless, it left much to be desired in terms of public morality, accountability and transparency. Shell and Agip, the oil majors on whose behalf the federal government made the payment to Malabu, have denied any wrongdoing, but the circumstances surrounding the payout typifies a classical official endorsement of Nigerian public officials abusing their offices and the trust reposed on them by ordinary citizens. Now that courts in Nigeria and Italy are investigating the case, Nigerians who ultimately bear the brunt of such backroom deals deserve a full explanation, why serving public officials violated the Civil Service Code by awarding oil blocs to themselves through proxies, without any sanctions or accountability.

Some stories are best told straight: on August 16, 2011, the Nigerian government paid Malabu Oil and Gas - a company, it later emerged, Etete had a vested interest - US$ 1.3 billion as part of an out-of-court settlement of a protracted legal fracas over OPL 245. Malabu won allocation for the bloc during Etete’s tenure as petroleum minister in 1998. This allocation was cancelled in 2001 over alleged failure by Malabu to fully pay the signature bonus, and failure to develop the field. It was reallocated to Shell and Agip after a successful bid. Malabu challenged the reallocation at the High Court in Abuja. Following the court’s decision, Malabu appealed. The federal government, the defendant in the case, decided in 2006 to settle the case out of court rather than contest Malabu’s appeal. But the Obasanjo and Yar’Adua administrations refused to compensate Malabu for the reallocation. Shell also initiated a suit as well as arbitration proceedings at the International Centre for the Settlement of Investment Disputes in Washington DC to prevent the reallocation of OPL 245 to Malabu.

In 2010 when Goodluck Jonathan, an ally of Dan Etete became acting president, Malabu asked the federal government to compensate it for the reallocation of OPL 245 and in exchange, it agreed to withdraw its appeal against the Federal High Court’s ruling. The government then arranged for Shell and Agip to pay Malabu $1.3 billion in return for Malabu’s waiving all claims in OPL 245. Malabu was entitled to $1.1bn and the federal government a $210m “signature fee”. Shell and Eni paid the money directly to the Nigerian government. A fixer involved in the deal described this approach as putting a “condom” between the buyer and seller so that at no point would Shell or Eni make direct payments to Malabu or Etete, who was a certified criminal, having been convicted for money-laundering in France in 2007.

 

Malabu has sought to justify its ownership of OPL 245 on the premise that it only heeded government’s call for indigenous participation in the upstream sector of the oil industry. It insisted that it complied with all necessary conditions and payments, including a clause that foreign participation in the bloc should not exceed 40%. The question however is whether it was morally appropriate for serving officers to award oil blocs to themselves through proxies, as was apparent in this case. Then Justice Minister Adoke, claimed the role of the Jonathan administration was a “facilitator of the resolution of a long-standing dispute” to demonstrate its commitment to attract investment in the oil and gas sector.

This was hardly credible in view of the circumstances surrounding the matter. The Jonathan administration exhibited profoundly disturbing and confounding enthusiasm to reward abuse of office, which, ought to have attracted sanctions. Nigerian Civil Service Codes forbid public servants from dispensing their duties to create benefits for themselves. On taking office, ministers swear to an oath that forbids the conversion of official duties and responsibilities to personal advantage. Yet, Etete awarded OPL 245 to Malabu; a company he was known to have vested interests. That the Obasanjo and Yar’Adua administrations did not charge anyone for such abuse of office is a reflection of the kid-gloves with which they treated corruption.

 

In December last year, the EFCC charged nine suspects, including Adoke, over the sale of OPL 245. Adoke was accused of illegally transferring more than $800 million, purportedly meant for the purchase of the OPL 245 to Dan Etete, Malabu Oil. The federal government on March 2 filed fresh charges against Shell and Agip for alleged complicity in the Malabu scandal. Adoke, Etete, Aliyu Abubakar, ENI Spa, Ralph Wetzels, Casula Roberto, Pujatti Stefeno, Burrafati Sebestiano, and Malabu were also charged. A joint investigation by US-based news portal, BuzzFeed and Italian newspaper Il Sole 24 Ore showed transactions worth $1.3 billion made in 2010-2011 that Shell and Eni paid to acquire OPL 245. The money was paid to the Nigerian government, but documents showed Shell’s top executives at the time knew the money would go to Malabu, a front company tied to then Petroleum Minister, Dan Etete.

 

In brokering the payment to Malabu and Etete, the Jonathan administration betrayed its complicity by rewarding a flawed process, wherein an oil bloc was allocated to a proxy company owned by a sitting petroleum minister, who later sold the bloc to oil majors and pocketed billions, shortchanging Nigerians in the process. How are the livelihoods of 170 million Nigerians, especially the poor and hungry in the Niger Delta, enhanced when their government arranges the payment of US$ 1.3 billion to a private company? Shell and Agip, not being charities, will recoup this “investment” they paid to settle the case out of court. This is income lost to Nigerians and something this shameful can only happen in Nigeria.

Malabu’s situation may be particularly brazen but it is hardly unique. The policy of allocating small oil blocs to indigenous firms, initiated in the early 1990s, was to develop technical and commercial capacity in oil prospecting and developing marginal oil fields. In practice, bureaucrats and politicians in charge of the oil industry have often awarded oil blocs to friends and cronies who have no knowledge of the industry. These people simply become billionaires by selling their allocations to foreigners rather than grow local expertise. Sadly, oil blocs have become perks of office and a multi-million dollar business for the rich and corrupt in our society. 

The government has approached the Federal High Court, Abuja, seeking a warrant of arrest against Adoke, who has been sojourning abroad, ostensibly on study leave. He has declared his innocence. Former President Jonathan too has denied he received gratification before approving the deal. A statement by his spokesperson, Ikechukwu Eze, denied Jonathan sent businessman, Abubakar Aliyu, to receive a bribe on his behalf during or after the negotiation. The Ijaw Youth Council (IYC) has also urged the government to stop the Malabu investigation saying it is a witch-hunt against the Niger Delta region, because an Ijaw man was involved. IYC is questioning why only OPL 245 is being probed whereas several other blocs awarded through the same process are not facing a similar probe. This kind of thinking is unhelpful. If we want to stop this kind of deal happening in future, accountability must be demanded from those in the system that made it possible. This should be high on the agenda of President Buhari and his APC party if they truly mean to change Nigeria.