The Saga of Malabu, The Facts, The Angles and The Fables

 

So I woke up on the morning of Wednesday 12 April to this heartbreaking video on Twitter.

 

As expected, Twitter was already on fire with sensation, arguments and counter arguments. This piece is an attempt to simplify the story and streamline the real issues to make for a more enlightened discussion. I hope it works. So here we go!

 

1. Dan Etete was appointed the Minister of Petroleum in March 1995 by late General Sanni Abacha. He remained in this position until Abacha died in June 1998. We have to start here from where we consider the very beginning.

 

2. In 1998 Dan Etete awarded OPL 245 to Malabu Oil and Gas Limited. The deal was allegedly struck only five days after the company was incorporated with three shareholders; Mohammed Sani Abacha , Kweku Amafagha (a fake name created by Etete) and Hassan Hindu (wife of a former Nigerian High Commissioner to the UK) and about two weeks before Abacha died.

 

Now HOLLUP, there are a lot of explanations to be done here! You see, Under the Petroleum Act of 1969 the entire ownership and control of all petroleum products in Nigeria is vested in the Federal Government of Nigeria and the FGN cannot transfer entire ownership to anyone but may give permission to persons to use or gain from it in form of licenses.  This also applies to land under our land laws. So, nobody really owns land, we only get the license or permission from the government to use it in certain ways for a period of time.

 

As regards petroleum, the government grants two broad types of licenses: the Oil Prospecting Licenses (OPLs); and Oil Mining Leases (OMLs).  Think of these licenses like the Certificate of Occupancy in relation to land (Not exactly the same but you get the sense). These licenses are granted to companies to carry out operations in relation to a specific area of land where there are proven crude-oil reserves. These areas of land are called Oil Exploration Blocks (YES! You got it. OIL BLOCKS).

 

OPLs are given at first for prospecting while OMLs are given later for mining, using, selling etc after the holder of the OPL has found crude oil in commercial quantity. So you see, an oil block is an area of land (very large often in 1000s of sq. kilometers) which is covered by a license given by the government to an oil drilling and exploration company. This is why oil blocks are categorized by the numbers of the licenses covering them. The oil block granted to Malabu, is the famous OPL 245, a 1,958 square kilometer oil field located in the Eastern Niger Delta in the offshore waters of Nigeria and considered one of the most valuable oil blocks in West Africa with a total estimated output of over 9 billion barrels of oil.

 

 

Under Nigerian law, the Minister of Petroleum Resources has immense powers. One of the powers he has is the power to grant licenses to companies. YES oh, he is like the Alpha and Omega, he wields ridiculously immense powers. He can almost unilaterally decide who gets what oil block and who does not. Now you see why President Buhari insisted on taking that position as part of his office immediately after resumption as President.  But can he assign an oil block to his own company? Of course he should not be able to do that under the law but Mr Etete used an alias; Kweku Amafagha, and with the cooperation of the head of state  whose son was a co-shareholder, well the deal was as good as done!

 

In fact it is alleged that Malabu paid just $2 million out of the $20 million dollars required at the time to be paid to the Nigerian government as Signature Bonus. Signature Bonuses are amounts which are payable to the government on the grant of OPLs and OMLs. Talk about colluding with the government and duping the government at the same time. (Take note of the word: Signature Bonus. It will be important in the juicier parts of this narrative).

 

So let us make this very clear, this was the beginning of the path of crime that is the Malabu story. The company was formed with the sole intent of fraudulently acquiring an asset without any regard to due process.  Dan Etete broke a lot of laws on official corruption by assigning OPL 245 to a company he clearly had ownership stake in. Importantly, the Code of Conduct Bureau and Tribunal Act makes it illegal for a public official to benefit personally from a decision he or she makes.

 

Plus, Malabu was merely a portfolio company; it really had no operations; no staff, no equipment to carry out any operations regarding the OPL 245. This is common practice in the Nigerian oil and gas sector today but abeg that is talk for another day. Meanwhile back to our story.

 

3. So in March 2001, Malabu and Shell Nigeria Ultra Deep Limited (SNUD) entered into a Farm-in agreement under which Malabu assigned 40% of its interest in OPL 245 to SNUD.

Okay so you remember that we said Malabu is a mere portfolio company and had no assets, manpower or technical assets or know how to carry out the exploration or utilization of the Oil Block it has acquired. Nigerian companies who are in this position often enter into agreements with better qualified entities like Multinational oil companies who will bring their expertise and know-how to help with exploiting the oil block and making it profitable. In exchange, the technical partner is given part of the interest under the OPL through an agreement to assign that interest (Quick hint: this is how almost all Nigerian holders of oil blocks make their billions. YES! You got it right, both male and female LOL). In this case, Malabu entered into a Farm-in agreement with SNUD a subsidiary of Shell in Nigeria which acquired 40% of Malabu’s interest in OPL 245. It is key to note that all this time, Dan Etete is the one fronting for the company; he is the person SNUD negotiates with (I hope we have not lost you at this point).

 

This looks like a normal transaction between two industry players for the purpose of exploiting OPL 241 and making it profitable for all stakeholders. Right!, except for one thing. By entering into an agreement with Malabu for a stake in OPL 245 with the full knowledge of how it acquired the Oil Bloc, Shell through its subsidiary SNUD, was violating British laws on corporate corruption, anti-money laundry and graft; laws which applied to all British companies and followed them to every country they do business in. But this piece is not about British law so we will just move on from here.

 

4. In July 2001, the Nigerian government under the administration of Olusegun Obasanjo revoked the license given to Malabu citing Malabu’s incompetence to make use of the license and in May 2002, awarded OPL 245 to SNUD. Of course this was immediately contested by Dan Etete who took the matter to court claiming that Obasanjo had approached him for a bribe and had accepted a bribe from SNUD when he refused. The matter continued in court until December 2006 when a settlement was reached between the parties and the asset was eventually re-awarded to Malabu.

 

5. Now with Malabu’s hold on OPL 245 fully secured, Dan Etete entered negotiations with Shell and Eni (an Italian Oil multinational) between 2009 and 2010 to sell off his interests in the oil block. However, a little (not so little) inconvenience appeared in 2010; Mohammed Abacha. The son of the late Sani Abacha went to court as part owner of Malabu and claimed that Dan Etete had taken fraudulent control of the company by acquiring and transferring its shares without the consent of other shareholders and entering into agreements without authority from the company. This appeared to be a deal spoiler in many ways for Shell and ENI.

 

Remember that Etete was not legally a shareholder in Malabu because he had used an alias so Mohammed Abacha’s claim raised issues around Etete’s interest in the company. This was not good for the multinationals with laws from their home countries they were trying to work around. To continue with the deal at this moment would have meant that the multinationals clearly understood the fraudulent use of Malabu by Dan Etete to launder assets. Okay just in case you are confused here lets line it out

 

So it appeared at this moment, that Shell/Eni would walk away from this deal until someone suggested an ingenious solution; Instead of dealing directly with Malabu and Etete, what if Shell/Eni could structure a deal with a credible middle person and make it appear like the deal was with this new entity? Guess who this entity was going to be… The Nigerian Government. Yes you got it (In Chigurl’s voice), the FGN.

 

So this was how the deal was meant to work: FGN was to be roped in as a protective layer; the government after all was eager to get oil drilling going in OPL 245. Nigeria would “take back” Etete’s rights to the field. It would sell the field to the two major oil companies. Then it would simply transfer the proceeds to Etete. The finances could be handled through escrow accounts. Everyone agreed that was a sensible solution. As part of the deal, the Nigerian government would receive a “signature bonus” (I told you not to forget this word) from Shell amounting to $207.9 million.

 

This deal was negotiated by the then Attorney General of the Federation, Bello Adoke through a set of back to back agreements involving the federal government as an intermediary. See a recent statement he made here.

 

There was also a Settlement Agreement between Shell and Malabu where it was agreed that Shell will pay the signature bonus of $207.9 million

The $1,09,040,000 was confirmed paid by Shell/Eni to the Federal government escrow accounts with JP Morgan Chase. The Bank also confirms that it subsequently received instructions from the FGN to make substantial payments of about $801,540,000 to accounts owned by Malabu in Nigerian banks. It has also been confirmed that onward transfers have been made from these Malabu accounts to other shady corporate accounts alleged to belong to top politicians belonging to the ruling party at the time and closely linked to the former president Goodluck Jonathan.

 

This deal is the focal point of the ruckus that has ensued over the OPL 245. You see, up until recently, Shell/Eni have insisted in British courts looking into the deal that they did not transact with Malabu for the oil field but with the Nigerian Government and that if monies were transferred to Etete or Malabu, they were unaware of it (By now, you should understand why they prefer this story).

 

The FG parties on the other hand have always been quick to push the argument that the FGN was merely a deal broker over a commercial interest between Malabu and Shell/Eni to resolve all conflicts and ensure the production of oil from OPL 245. The current admission by Shell officials was caused by the leak of conversations by Shell executives that made it clear they were aware that the monies would end up with Etete.

 

 

1. The value of an oil block (whether it is 500 billion or not, LOL) is not what determines payment to the Federal government when it grants an OPL. What the FG is entitled to under the law is the signature bonus. Going by this fact, $207.9 million is way over the normal amount of signature bonus which the Federal government is entitled to especially considering the accusation that Malabu had paid a meagre sum to the government when it first obtained the OPL 245. It is however unclear if the entirety of this amount made its way into government coffers. If it did not, a crime would have been committed.

 

2. A settlement agreement transferring all the rights from Malabu to Shell/Eni is on the face of it a legal, commercial transaction. It is like selling your land to a buyer and transferring ownership of the C of O. However, a few incidents taint this otherwise clean albeit lucrative transaction.

 

 

The information in this piece are sourced entirely from documents available online and the opinions expressed herein except clearly stated are the opinions of the writer.

 

 

Source: Legitng.com