New analysis shows oil deal deprived Nigeria of estimated $6 billion projected revenue

By agency reporter
November 28, 2018

A deal struck by Shell and Eni for one of Africa’s most promising oil blocks reduced Nigeria’s expected revenue by an estimated $6 billion, new analysis from world-class oil experts reveals. The projected lost revenue could fund Nigeria’s combined annual federal health and education budgets twice over.

The oil giants' 2011 deal for Nigeria’s OPL 245 oil licence hid terms that deprive the Nigerian state of billions of dollars of future revenue, whilst bringing the companies huge additional profits. The revelations are published in a report from Global Witness called Take the Future. It draws on an analysis from leading experts at Resources for Development Consulting commissioned by Global Witness and NGOs HEDA, RE:Common and The Corner House.

The analysis of the contract terms estimated these changes could reduce the Nigerian Government projected revenue from the oil fields by $5.86 billion over the lifetime of the project when compared to the terms that had applied before the 2011 deal, and assuming an oil price of $70 per barrel.

Shell and Eni are already facing bribery charges over the OPL 245 deal in a landmark trial in Milan. (http://www.ekklesia.co.uk/node/25866)This new report shows the companies altered the terms of the agreement in their favour.

Two weeks before the deal was signed in 2011, Nigeria’s most senior civil servant in the Department of Petroleum Resources wrote to the President calling the deal “highly prejudicial to the interests of the Federal Government”.

Barnaby Pace from Global Witness said “Shell and Eni execs set the deal up so that Nigeria would earn some $6 billion less than it could have. This scandalous deal must be cancelled.”

Nigeria, one of the most oil rich countries on the planet, has the world’s highest number of people living in extreme poverty in the world, at 87 million. 80 per cent of Nigerians live on less than two dollars a day.

No company as large as Royal Dutch Shell or such senior executives of a major oil company have ever stood trial for bribery offences. The trial continues and Eni and Shell, together with their managers and other defendants have denied wrongdoing.

Shell did not comment on the specific points put to them, saying that “issues that are under consideration as part of a trial process should be adjudicated in court” but stated “we maintain there is no basis on which to convict Shell or any of its former employees. We believe that the trial judges will conclude that there is no case for us to answer and we are vigorously defending our position accordingly”. They also disputed the methodology and alleged that wrongful factual assumptions were made, but did not specify any particular error.

Eni rejected “any allegation of impropriety or irregularity”. They said in light of their ongoing trial it would be “inappropriate for us to comment on such circumstances outside the court” but did not comment on the specific points put to them about the study other than to say “the technical and contractual assumptions adopted as the basis for the analysis appear to be partial and inaccurate, if not misleading.”

* Download Take The Future: Shell's scandalous deal for Nigeria’s Oil here

* Global Witness https://www.globalwitness.org/en-gb/


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