COLUMN | Quick updates: Eni acquittal on corruption charges, SBM whistleblower, Fisher fatalities, Pacific Drilling/Noble merger, Scottish windfarm windfall, and Golar/Perenco FLNG dispute [Offshore Accounts]
For the end of the quarter, we feature a six-pack of updates on stories we covered recently.
Eni (and Shell) acquitted over US$1 billion Nigerian corruption (for now)
One of the longest-running, most convoluted, and highest-level corruption cases in the oil and gas industry seems to have been resolved, for now.
In 1995, then-president General Sani Abacha appointed Dan Etete as Nigerian oil minister. In 1998, Mr Etete awarded a little-known company called Malabu Oil and Gas a licence to explore and produce in offshore block OPL 245. Who owned Malabu? That would be Mr Etete himself, using a pseudonym, records show. Now, I am aware of the irony of the author of a column written under a pseudonym criticising Mr Etete for using a false identity, but please bear with me.
Unfortunately, General Abacha died of a heart attack aged just fifty-four in 1998 (apocryphally, in the arms of a Russian hooker, or two). After this sad loss, Mr Etete was caught up in complaints and investigations over the theft of hundreds of millions of dollars from the state treasury during the military dictator’s tenure. He was subsequently convicted of money laundering in France in 2007.
In 2011, Mr Ete’s Malabu handed OPL 245 back to the Nigerian state, while in parallel Shell and Eni agreed to pay the Nigerian government US$1.3 billion to settle a long-standing dispute over the oil field’s ownership, and to acquire operatorship. Immediately after the western oil giants paid the money, and the day before long standing anti-corruption campaigner Ms Ngozi Okonjo-Iweala (now director-general of the World Trade Organisation) was appointed finance minister in Nigeria, president Goodluck Jonathan made a strange decision. The president agreed to pay US$1.1 billion to, er, Malabu’s account in London.
Prosecutors in Milan had alleged that the US$1.1 billion was immediately paid off by Malabu to Etete and senior Nigerian politicians for their support for the deal. The prosecution alleged that Eni and Shell knew that the cash would be stolen, and that the money was effectively a bribe to secure OPL 245. The defendants said the purchase price for OPL 245 was paid into a Nigerian government account, and that subsequent transfers were completely beyond their control. The judge agreed with them, and found that they had no case to answer. Mr Etete cried tears of joy, his lawyer said.
Reuters reported that the Nigerian government said it was “surprised and disappointed” by the verdict and was considering whether to make an appeal. Strangely, though, the government in Abuja seems to have taken no action against President Goodluck Jonathan, who actually authorised the transfer to Malabu, although it is suing J.P. Morgan in London. The Nigerian government claims that the bank was negligent in transferring US$875 million of the OPL 245 settlement to Malabu in 2011.
Eni also not guilty in Congo corruption case
Make it a double! Eni also agreed to a settlement with Italian prosecutors over corruption claims in Congo-Brazzaville last week. It agreed to pay €11.8 million (US$13.8 million) to settle criminal claims that it gave stakes in the blocks in Congo to a company owned by a state official who was closely connected to president Denis Sassou Nguesso, and who was involved in the decision-making process in the award of oil and gas licences.
President Sassou Nguesso has awarded Eni’s CEO a personal order of merit, as reported by Global Witness here. The settlement does not involve any admission of guilt or responsibility by Eni, and the charges have been dropped.
Eni’s statement on the settlement is here.
SBM whistleblower still wanted in Monaco
Whistle-blowing lawyer Jonathan Taylor (whose plight we covered in February here) remains trapped in Croatia for the ninth month as the local courts have once again tried to enforce an extradition order from Monaco. His attempts to overturn the extradition request have floundered this month, after Monaco’s de facto Minister of Justice, Robert Gelli, submitted to the Croatian authorities that there was indeed a valid international arrest warrant for him, which is disputed by Mr Taylor’s lawyers.
Mr Taylor was arrested under an Interpol Red Notice last year after arriving in Dubrovnik on holiday, even though he has not been charged with any crimes, and Monaco states that he is simply wanted for questioning in the principality over his dealings with his former employer SBM Offshore, the FPSO and engineering company. SBM Offshore is the largest private sector employer in Monaco and was fined over US$800 million after Mr Taylor exposed the details of its corruption in multiple countries. Two of its former CEOs have been convicted for corruption.
Mr Taylor’s case looks set to go back to the Croatian Supreme Court for the third time, and he is promising to take it to the constitutional court in Zagreb, if necessary.
The lesson for whistle-blowers everywhere? Whilst Dubrovnik is lovely for a holiday, check whether there is an Interpol Red Notice for your arrest before you depart to enjoy the Game of Thrones ambience. Make sure you have got a good solicitor on speed dial. And always remember, in the words of Toby Cadman, Mr Taylor’s lawyer, that “it is a settled matter of international law that a request for extradition must be for the purpose of (a) prosecuting a person; or (b) to serve a sentence after having been convicted of a criminal offence by a court of law. This requirement is absolute and is not subject to differing forms of interpretation.”
This legal learning has been slow to be received by the courts of the Republic of Croatia, sadly. Good luck Jonathan!
James Fisher fatalities in Kenya
As expected, the James Fisher and Sons results for 2020 (here) were dire, with a massive £84 million (US$115 million) hit from what the company euphemistically described as “separately disclosed items”. These included a Carillion-style write-down of intangible assets and goodwill from previous acquisitions of £19 million (US$26 million), a write-down in the book value of the dive support vessels Subtech Paladan and Subtech Swordfish of £32 million (US$44 million), and a write-off of receivables (invoices issued to customers but not paid) also of £19 million (US$26 million). This dragged the company to a net £57 million (US$78 million) loss for the year.
Enough said. We expected this, and we warned over a year ago that there was something fishy at Fisher (here).
Now our suspicions of management incompetence are further raised by one of the most sensational and bizarre statements we have ever read in any report, anywhere, by any company. In his statement accompanying the results, Fisher CEO Eoghan O’Lionaird writes to express condolences that:
“On a pile-testing project in Kenya, the transportation barge on which employees were travelling capsized following an engine failure. Everyone on board was rescued, or managed to swim to safety, except for the two fatalities. We are deeply saddened by this event and investigations indicate that nothing could have been done to avoid this tragic outcome. Our thoughts remain with both families.” (emphasis added)
“Nothing could have been done”
Run that past me again… Fisher’s investigation showed that a barge capsized following an engine failure. Firstly, how does that even happen? I understand that barges sometimes capsize, typically due to overloading. I understand that engines fail, typically due to mechanical breakdown. But I am unsure how an engine failure leads to a barge capsizing, which then results in two fatalities, because the casualties were unable to “swim to safety”. What?
If Fisher is able to publish its detailed investigation into the loss of these two lives, perhaps they might be able to justify this assertion. Baird Maritime would welcome receiving the report and would be happy to participate in a public debate over the safety issues involved.
Until that happens, however, for the CEO of a public listed marine company to write that “investigations indicate that nothing could have been done to avoid this tragic outcome” is absurd. Short of the barge being struck by a meteor from outer space and exploding, I find it hard to believe that “nothing could have been done.”
How about not having the engines fail, and not having the barge capsize? Surely there was a root cause for the engines failing, which could have been avoided, and a root cause for the capsize, which could also have been avoided?
This statement from Eoghan O’Lionaird to investors raises so many questions about the quality of safety management at James Fisher, that we would welcome the company to share more details on the incident and to clarify what went wrong. Why, exactly, was it inevitable that two people perished when this barge’s engines failed and it capsized? Please tell us more.
Pacific Drilling/Noble Corp merger consolidation in the drilling sector
You know how it is. You go through a difficult bankruptcy, shake off your debts and start anew, and immediately you meet someone who has done the same, downsized, and gone debt-free too. You hit it off, fall in love, and quickly tie the knot promising a bright future together.
So it is in offshore drilling when on March 25, Noble Corporation announced here that it was merging with Pacific Drilling in an all-stock transaction. The merger was ushered through quickly and unanimously approved by each company’s board of directors. The shareholders of Pacific Drilling approved it – they being the debt holders from the Chapter Eleven restructuring, which the company exited on December 31. The Pacific Drilling stockholders will receive approximately a quarter of the outstanding shares of Noble at closing.
This is about consolidation and cost cutting, as the entire Pacific Drilling structure is swiftly and ruthlessly absorbed into Noble. Noble says that it expects “to realise annual pre-tax cost synergies of at least US$30 million” and will move to sell two laid-up rigs, Pacific Bora and Pacific Mistral. That will leave the Noble fleet expanded by five legacy Pacific Drilling deepwater units, three of which are working at present. Noble’s existing fleet (here) consists of six deepwater drillships, one midwater semi, and twelve jackups. The transaction is expected to be completed in April 2021, the companies report.
The disposal of Pacific Bora and Pacific Mistral comes after the news that Vantage Drilling has decided to dispose of its nine-year old drillship Titanium Driller from lay-up in South Africa.
Reuse, recycle, renewable?
It seems such a waste of massively powerful and expensive modern equipment that the Pacific Drilling units should be scrapped so early. Could they not be repurposed in the renewables business? There’s an ocean thermal energy conversion project here and the excellent Offshoretronic concept to adapt a DP drillship into a windfarm turbine installation vessel here.
With a nifty drillship conversion business plan in his back pocket, Noble boss Robert Eifler might be able to rerate his company’s share upon relisting to the renewables standard of 25 or 30 times earnings, like Ørsted. That’s got to be a lot better than selling the two Pacific Drilling drillships from smart stack for US$10 million apiece as scrap. And a lot better for the environment, too.
Scottish windfarm windfall
We reported last month (here and here) that the Queen’s Crown Estate has profited mightily from the rental of the seabed to bidders in the latest round of windfarm acreage off England and Wales, with BP, in particular, offering such large sums of money to rent the seabed from Her Majesty for future windfarms that it “blew away” all the forecasts for the proceeds of the process. With up to eight billion pounds (US$11 billion) in option rights offered by the winning bidders to rent the six pieces of the seabed off England and Wales for future windfarm usage, Scottish hearts were set aflutter, too.
Crown Estate Scotland decided, in conjunction with the devolved administration in Edinburgh, that it would be “sensible” to pause its own auction of offshore windfarm blocks, and undertake a six-week review of the structure for its own auction. The Crown Estate said it wanted to obtain “a fair price” for the lease of the seabed sites along the Scottish coast. A fair price being a higher price, strangely.
The fair price just got bigger, with The Guardian reporting here that bidders will now likely pay over US$1 billion for the sites under the “adjusted” commercial arrangements for the sealed envelope bids. Crown Estate Scotland had originally planned to cap the amount developers could offer for a seabed lease at £10,000 (US$13,700) per square kilometre, as a one-off lump sum. After looking at the huge bids south of Hadrian’s Wall, the new rules state the lump sum offer will be allowed to increase up to a maximum £100,000 (US$137,000) per square kilometre.
That should provide plenty of cash to bail out the losses on Edinburgh’s disastrous rescue of the Ferguson Marine shipyard and the Bifab construction yard, which have been reported in the local press to have cost the Scottish taxpayer over US$100 million (here).
Whilst a bidding war to develop offshore wind farms is great, someone is going to have to pay for the higher lease costs for the seabed, and we suspect it will be users of electricity in the UK a decade from now. It seems churlish to point that out now before the bids are even submitted.
Perenco/Golar – Please don’t go
If Pacific Drilling and Noble Corporation’s whirlwind love affair represents consolidation, the current contract dispute between Perenco and Golar LNG shows the dangers of divorce.
We have always been big fans of FLNG (see here on why it is so important), and the current dispute reinforces the attractiveness of the concept. Usually, disputes between energy companies and their contractors are over the oil company terminating a contract and the vessel owner disputing the termination. Not this one.
This dispute is the opposite. Golar has told Perenco that the charter for the Hilli Episeyo FLNG vessel will not be extended beyond the eight years firm, because Perenco doesn’t pay enough, and that Golar can make better returns from the vessel with another, unnamed client elsewhere. IHS Markit highlighted the success of the unit and Perenco’s efforts to increase production through it here.
The contract was written by esteemed law firm Ince and Co, and has been published for online scrutiny as part of a filing with the SEC in the US here. It does seem to clearly state in Clause Two that the contract will lapse after eight years and that Golar can take the unit elsewhere in 2026. But what do we know?
Mike Posner’s Please Don’t Go video is here (2010) whilst Yazoo’s 1982 hit Don’t Go is here.
Perhaps Perenco just needs to serenade Golar chairman Tor Olav Troim harder.
Mr Taylor’s case is just one of a number of examples of threats to freedom of expression across Europe, especially in the former Yugoslavia, which the Media Freedom Rapid Response organisation highlights here.
Reuters coverage of the acquittal of Eni and Shell on the OPL 245 corruption charges is here.
The earlier conviction of two middlemen in the OPL 245 case in 2018 in Milan was covered here.
The excellent Sahara Reporters story on “How Ex-Nigerian Petroleum Minister, Dan Etete, Laundered Millions Of Dollars” is here – note the mind-blowing accounts of historic bribery by several well-known oil companies.
This anonymous commentator is our insider in the world of offshore oil and gas operations. With decades in the business and a raft of contacts, this is the go-to column for the behind-the-scenes wheelings and dealings of the volatile offshore market.