Judge clears Shell & Eni of Nigerian oil deal corruption charges

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ENERGY & UTILITIES

A judge in Italy has cleared Royal Dutch Shell, Eni and a number of both groups' former executives of corruption charges in a long-running case relating to a Nigerian oil deal in 2011.

After several hearings over three years, Judge Marco Tremolada acquitted all 15 defendants, saying that "a crime was not committed".

The companies and executives were accused by prosecutors of knowing that the majority of the $1.3 billion (€1.09 billion) that was paid in 2011 for the licence to drill the OPL 245 oilfield in Nigeria would go towards bribes for government officials, businessmen and middlemen, in particular former oil minister Dan Etete who was convicted in a separate case of money laundering.

Prosecutors were looking for eight-year prison sentences for current Eni CEO Claudio Descalzi and his predecessor Paolo Scaroni, a ten-year sentence for Etete, and 88 months for former Shell executive Malcolm Brinded, as well as a total of $1.1 billion (€920 million) in fines.

All defendants denied any wrongdoing.

Immediately following the court ruling, Descalzi's lawyer, Paola Severino, said that her client's reputation had been restored, as well as that of Eni.

The Nigerian government said it was "disappointed" in the ruling, adding that it would await the written judgement "before considering its position". Abuja had argued that it has been the victim of long-running and serious fraud.

"Nigeria will continue to hold those responsible for the OPL 245 fraud accountable, not only to ensure the people of Nigeria benefit from this valuable resource but also to make clear its commitment to rooting out corruption in all of its forms," said the government in a statement.

The judge's ruling is the latest instalment of one of the oil sector's longest-running and most infamous corruption cases, beginning in 1998 when Etete during his time as minister awarded Malabu Oil and Gas, a company which he controlled, the licence to exploit OPL 245.

The following year, Etete paid just over $2 million for the licence on behalf of Malabu, out of the originally agreed sum of $20 million.

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In 2001, Royal Dutch Shell agreed to acquire a 40% stake in OPL 245 from Malabu.

Later that year, the newly elected Nigerian President Olusegun Obasanjo revoked Malabu’s licence, triggering legal disputes over its ownership that would continue for years. 

In 2002, Shell was awarded 40% of OPL 245 and began exploration activities. The company later signed a production-sharing deal with the Nigerian National Petroleum Corporation (NNPC).

The same year Shell began arbitration against Malabu at the International Court of Arbitration. The two-year case ultimately ruled in favour of the oil giant in 2004.

In 2010, Italy's Eni entered talks with Shell and Malabu to buy a stake in OPL 245 which resulted in a $1.3 billion deal a year later for a plot off the Niger Delta, which remains undeveloped today. While the deal was intended to settle the ownership disputes, it ultimately led to the bribery investigation in Milan, as well as probes in the US and the Netherlands. 

Separate legal proceedings are underway in the UK in which Nigeria alleges JPMorgan Chase knowingly facilitated the misappropriation of state funds amounting to $835 million through transfers from accounts owned by Malabu. The bank denies the charges.

In 2018, two middlemen involved in the OPL 245 deal were tried in Italy on corruption charges and found guilty.

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Both Shell and Eni still operate in Nigeria and both companies maintain the deal was legitimate and state-sanctioned, saying that the was money paid into a government account and what happened to it after had nothing to do with them.

"We welcome today’s decision by the Milan tribunal,” said Shell CEO Ben van Beurden. “We have always maintained that the 2011 settlement was legal.” However, he acknowledged “this has been a difficult learning experience for us”.

Oil majors are under ever-increasing scrutiny from activists and investors over their environmental, social and governance (ESG) credentials, which includes operations in foreign countries.

Global Witness campaigner Barnaby Pace, who has followed the OPL 245 case for years, told the FT: "We await the details of how the judges reached this ruling but believe that this verdict shows just how hard it is to hold the fossil fuel industry to account."

Ahead of the verdict, Etete dismissed the case as "shameful" and said that Nigeria's involvement was payback by president Muhammadu Buhari who was head of the country's Petroleum Trust Fund under Etete in the late 1990s.

“I’m being persecuted,” he said, adding that the deal had been signed off by the Nigerian government. “This is heinous.”

Descalzi was reappointed to his position as CEO in May 2020. Last year he told the FT: "I don't feel guilty. I'm absolutely calm and clear in my mind. I know what Eni did and what I did. There is no point in this issue."

Royal Dutch Shell is still embroiled in a number of other legal challenges connected with its operations and environmental damage in Nigeria. Earlier this year, van Beurden admitted the company needed to reevaluate its onshore operations in the country. 

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