A new lease
Bloomberg has reported that Nigeria is dropping $1.1 billion civil claims against Italian energy group Eni over alleged corruption in an…
Bloomberg has reported that Nigeria is dropping $1.1 billion civil claims against Italian energy group Eni over alleged corruption in an oilfield deal. The country’s justice ministry plans to waive the claims before Italy’s highest court “unconditionally” and “with immediate effect” by November 17, citing a letter related to the Oil Prospecting Licence (OPL) 245 field. Eni welcomed the decision and expressed readiness to collaborate with Nigeria for the licence’s conversion from prospecting to mining. In 2021, a Milan court acquitted Eni, its CEO and Shell in a corruption case linked to the oilfield acquisition.
The FG’s decision to withdraw the lawsuit against Eni is likely connected to the company’s willingness to consider crude oil exploration in Nigeria. Just two months ago, Nigerian energy company Oando announced that it had agreed with Eni to acquire 100 percent of the shares of its oil and gas unit, Nigerian Agip Oil Company. Eni’s planned divestment from its Nigerian assets must have spooked the Nigerian government into the action that led to the lawsuit. Unfortunately, Eni’s concerns are similar to those of other IOCs, including oil theft and security concerns. Other IOCs have been making moves to divest from some of their on-shore holdings in Nigeria to focus on deep water assets where they can mitigate oil theft risk and interactions with communities. For example, Shell has reportedly resumed negotiations to sell its share in a joint venture operating onshore and shallow-water oil and gas fields in Nigeria to indigenous company ND Western. This development follows a Supreme Court ruling that compelled Shell to await the outcome of an appeal regarding a 2019 oil spill before proceeding with the sale. Similarly, ExxonMobil has agreed to divest its equity interest in its Mobil Producing Nigeria shallow-water affiliate to another local company, Seplat Energy. The history of the Eni-Nigeria lawsuit revolves around OPL 245, one of Nigeria’s most extensive oil fields. OPL 245 has been the subject of legal tussles for the past decade. Here’s a brief history of the legal battle: In 1998, the oil prospecting licence for the oilfield was awarded to Malanu Oil, which was rumoured to be owned by Mohammed Abacha (son of a former Nigerian dictator, Sani Abacha) and Dan Etete, who was the petroleum minister at the time. The licence was revoked in 2001 by President Olusegun Obasanjo, who assigned the oil block to Shell without a public bid. Malabu retrieved ownership of the oil bloc, and an agreement was reached for Shell and Eni to buy the field for $1.3 billion, including a $210 million signature bonus to the government. In 2015, the Muhammadu Buhari administration initiated legal proceedings against the companies, alleging that the monies were used to bribe government officials. However, the Nigerian government racked up judicial losses. In April, local media reported that the Economic and Financial Crimes Commission had proposed compensation for Mohammed Abacha as part of the Buhari administration’s efforts to convert the OPL 245 licence to an oil mining licence. In the grand scheme, exploration at the OPL 245 oilfields means increased production and revenue for the Nigerian government. However, it may be coming a bit late since there are indications that the Organisation of Petroleum Exporting Countries may reduce Nigeria’s quota to 1.38 million barrels per day. The trend of IOCs divesting shallow-water assets in Nigeria is expected to continue, driven by factors such as a desire to exit the country or a shift in focus towards deep-water investments less vulnerable to oil bunkering and host community issues. While this trend presents opportunities for local operators, it also challenges the industry’s ability to attract the substantial capital that IOCs typically bring to the table.