Netherlands’ Public Prosecutor’s office has informed Royal Dutch Shell Plc of its intention to prosecute the oil company over a license in Nigeria, which has resulted into series of prosecution in two other countries.
Royal Dutch Shell Plc made the disclosure of the trial public on Friday. The case by the Dutch Public Prosecutor’s Office is related to the 2011 settlement of disputes over Oil Prospecting License 245 in the Gulf of Guinea.
“We have been informed by the Dutch Public Prosecutor’s Office that they are nearing the conclusion of their investigation and are preparing to prosecute,” The Hague-based Shell said Friday.
Though, Shell and Eni have previously denied any wrongdoing in the OPL 245 case. They have said they paid into a legitimate government account to settle legal claims related to the block.
The license with a trail of trials
Shell has been dogged by legal action from the transaction for years, with prosecutors in Italy alleging that the 2011 deal was tainted by corruption. This is a separate criminal trial in Milan.
It was alleged that at least part of a $1.1 billion payment Shell and partner Eni SpA made to settle charges around the license was converted into bribes. The trial in Milan started in June last year, with the court already procuring two guilty verdicts against defendants opting for “fast-track” proceedings.
Nigeria is also suing the oil companies in London.
Italy case claim
In the case filed by Italian prosecutors, the main claim is that the companies improperly settled long-standing disputes over the OPL 245 license. The permit had originally been awarded in 1998 by Nigeria’s military dictator, Sani Abacha, to Malabu Oil & Gas Ltd., a Lagos-based company connected to then-Petroleum Minister Dan Etete. Under successive governments, the license was canceled, awarded to Shell, and then awarded to Malabu again before the 2011 deal.
The Milan prosecutors allege that Shell and Eni paid almost $1.1 billion into an escrow account for the Nigerian government, from which about $800 million was later transferred to Malabu to be distributed as payoffs.
Effect of trials on Shell’s shares
With the risk of financial penalties for Shell resulting from additional trial, Shell’s B shares in London rose slightly at the start of trading on Friday, as the news didn’t worry investors. But note that additional trial will bring the details of Shell’s work in Nigeria into focus for its shareholder base in the Netherlands.
It was learnt that Shareholders with tight environmental, social and governance restrictions are likely to be well aware of the scrutiny over Shell’s Nigeria activities.
Meanwhile, an analyst at Jefferies LLC, Jason Gammel said the investing community is not concerned as such topic doesn’t come up during discussion with investors.
“There is a small segment of the investing community that is concerned with it, but for the most part when I meet with investors it doesn’t come up,” said Jason Gammel, an analyst at Jefferies LLC. This license already “doesn’t generate any profit.”
According to a Bloomberg report, Gammel said he doesn’t include the OPL 245 license when considering Shell’s future cash flows, and investors are more concerned with things that can affect near-term profit. The company could face fines in multiple jurisdictions, but those are likely to be easily absorbed by Shell’s large size.