Shell and Eni paid $1.3 billion for oil rights in Nigeria. Whether the money was mostly a bribe is at the heart of one of the industry’s most dramatic criminal cases
A top oil executive walked into the marble lobby of an exclusive Milan hotel on a chilly winter night. His dinner date was a former Nigerian oil minister offering to sell one of Africa’s biggest untapped oil discoveries.
Eight years later, the question of whether the $1.3 billion paid for the license to that prized oil field was mostly a bribe is at the heart of one of the biggest bribery scandals the oil industry has ever seen.
Part of a broader crackdown, the case has reached into the highest levels of the executive ranks of Royal Dutch Shell RDS.B 1.94% PLC, the second-largest Western oil company—including wiretaps on its chief executive—and into Eni E 2.08% SpA, Italy’s state-backed oil company.
Italian prosecutors say Claudio Descalzi, the senior Eni executive at the Milan dinner, and high-level Shell officials approved an arrangement that allowed them to pay the government while knowing most of the money would be transferred to a company controlled by Dan Etete —the ex-oil minister Mr. Descalzi met that night, according to court documents. The prosecutors say executives knew Mr. Etete would pay off Nigerian officials and send kickbacks to Eni executives. A criminal trial begins in Milan on March 5.
The scheme went as high as former Nigerian President Goodluck Jonathan, who received payouts during his presidency, the prosecutors say. Mr. Jonathan has denied involvement.
The case is a rare example of top executives from giant Western oil companies facing accountability for corruption. Scrutiny of foreign bribery is growing. More than 500 ongoing investigations were taking place in member countries of the Organization for Economic Cooperation and Development in 2016, up about 25% from 2015, according to the 35-nation group’s latest analysis.
British authorities are investigating alleged oil-industry bribes in Iraq, and the U.S. has sought to recover more than $100 million as part of a wide-ranging investigation into oil-industry corruption in Nigeria.
The amount of money that allegedly changed hands in the Eni-Shell case could prove to be one of the oil industry’s largest ever bribes, said Global Witness, a London nonprofit that investigates allegations of wrongdoing in the resources industry.
Flow of Funds
Prosecutors allege Shell and Eni agreed to pay $1.3 billion to Nigeria for the rights to a valuable offshore oil field, knowing that the government would funnel $1.1 billion of that amount to a company called Malabu to be used for bribes.