IMF Might Need Some Answers: GNPC, GNGC, ENI And Due Diligence

The news that Ghana's Parliament approved the deal on the oil and gas project with ENI of Italy could raise important questions related to the Country's program with the IMF. There are implications for the budget, even as the price of crude continues to dip below the numbers used to estimate oil revenues to fund the Budget and other sectors, especially social safety nets might be compromised.

Whether subsuming GNGC into GNPC will affect the share of carried and participated interest of GNPC in its contract with ENI and whether there will be an impact on public and publicly guaranteed external debt is a big question.

Parliament already did the unthinkable and passed the $8billion contract with ENI speedily as it does when under pressure from Government to shore immediate cash demands.

The IMF program is struggling to finality, principally on a few key issues. One, the total value of Government debt is still open to debate and whether the composite debt must include liabilities of certain key parastatals such as VRA, GNPC and TOR must still be of concern. As also the debt of key Municipalities and Metropolitan Assemblies.

Two, the projected revenues are a problem with periodic budgets consistently below target and the payroll envelope is still threatening to engulf revenues.

As Parliament ducked the minority call for a stay in loan approval pending the $700million facility in court re: GNPC, the decision begged the question whether anyone had taken a closer look at ENI on the world scope.

In Nigeria, the Eni CEO is being investigated by prosecutors over a Nigerian Oil Deal (Reuters)

CEO Claudio Descalzi is under investigation by Italian prosecutors over alleged international corruption relating to a big Nigerian oil deal.

Milan prosecutors opened an investigation into the deal earlier this year and have now widened the net to include new Eni CEO Descalzi in a case relating to its $1.09 billion acquisition of Nigeria's OPL-245 offshore oil block in 2011.

Descalzi, a long-standing executive at the state-controlled major, took the helm from Paolo Scaroni who is under investigation for alleged corruption in Algeria. Scaroni has denied the charges.

Eni said in a statement its Operations and Technology Officer Roberto Casula was also being investigated.

Bloomberg confirms the story that Eni's former CEO Scaroni is being probed in Algeria in a corruption case

Scaroni's home and office were searched as part of the probe, which focuses on 11 billion euros ($14.7 billion) of Saipem contracts and 197 million euros in alleged bribes. Eni is the largest investor in Saipem, Europe's biggest oil-service provider by market value.

A Global Witness Story
In May 2012, Global Witness pieced together detailed court documents and other evidence that exposed how Nigerian subsidiaries of Royal Dutch Shell and Italian oil giant Eni agreed to pay US$1.092 billion for one of Nigeria's most lucrative oil blocks, OPL245.

The payment was made by Shell and Eni to the Nigerian government who had a separate agreement to pay the same amount to Malabu Oil and Gas, a company widely believed at the time of the payments to be controlled by convicted money-launderer and former oil minister Chief Dan Etete. In July 2013, a British High Court ruled that Etete was indeed the owner of Malabu Oil & Gas. As Etete had awarded the oil block to Malabu Oil and Gas whilst oil minister during the regime of the corrupt dictator General Abacha, he had effectively given himself one of the most lucrative oil blocks in Nigeria.

Shell and Eni deny paying any money to Malabu Oil and Gas. However, High Court proceedings and other evidence seen by Global Witness reveal that, in reality, Shell and Eni were aware and in agreement that the deal was for the benefit of Malabu, and had even met with Etete face-to-face on several occasions. In fact, testimony heard during the case indicates that an official from Shell previously negotiated directly with Etete over “iced champagne” and that Eni officials had enjoyed a luxurious dinner at a 5-star hotel in Milan with him.

Global Witness believes that the deal was structured primarily to allow Shell and Eni to claim that they had not struck a deal with Etete nor Malabu. Yet in making these payments, Shell and Eni effectively bought the block from Etete for over a billion dollars, therefore 'monetising' an asset that was acquired by Malabu Oil and Gas in highly suspicious and possibly illegal circumstances.

Documents seen by Global Witness indicate that over US$801 million of the money transferred to Malabu Oil & Gas was later transferred to a further five shell companies with hidden owners, raising concerns as to who truly benefited from this deal.

It makes you wonder whether we did any due diligence when we awarded ENI an exploratory block and subsequently rushed the deal through Parliament.