Probe Into Murky Exxon Mobil Deal Shows Need For Tough Oil Transparency Rules

Global Witness Report Sheds Light on ExxonMobil’s Questionable Dealings in Nigeria

Abuja, Nigeria — A major oil deal struck by Exxon Mobil with the Nigerian Government is being investigated by Nigeria’s Economic and Financial Crimes Commission, a law enforcement agency that investigates high-level corruption, Global Witness reveals today. The case highlights the need for the U.S. Securities and Exchange Commission (SEC) to create strong transparency rules for oil companies, which are due for release by this Monday, June 27th.

The probe centers on a protracted and controversial deal agreed by Exxon Mobil and the Nigerian Government in 2009 to renew three lucrative oil licences, which at the time accounted for around a quarter of Nigeria’s entire oil production. Exxon Mobil reportedly agreed to pay $600 million to renew the licences and construct a power plant at a cost of $900 million to the company, making a total contribution of $1.5 billion. Yet documents seen by Global Witness indicate the Nigerian Government may have valued the licenses at $2.55 billion, and that the Chinese oil major CNOOC offered to pay $3.75 billion for the same licences – over six times the amount reportedly paid by Exxon Mobil.

“We welcome the investigation. We need answers as to why the former President Yar’Adua’s Government awarded the licences to Exxon at a seemingly knock-down rate, despite being offered what appears to be a far superior deal from a credible competitor,” said Dominic Eagleton, a senior campaigner with Global Witness.

The new SEC rules will require U.S.-listed oil, gas and mining companies to disclose details of the hundreds of billions of dollars they pay to governments every year, such as taxes, royalties and licence fees, wherever they operate in the world. Currently there is very little transparency for oil and mineral companies’ payments to governments, which leaves these vast public revenues vulnerable to corruption. In Nigeria alone, an estimated $400 billion in oil revenues has been lost to corruption and mismanagement since 1960.

The U.S. rules aim to deter corruption and cut poverty by enabling citizens to monitor payments and hold both governments and companies to account for how the money is used. Yet ExxonMobil has been lobbying U.S. policymakers to prevent the new rules from shedding light on precisely the kind of deal it carried out in Nigeria that is now being investigated by anti-corruption enforcers.

“This shows precisely why U.S. policymakers should reject Exxon’s call to water down the transparency rules and allow companies to hide payments made on individual oil deals, such as Exxon’s licence renewal in Nigeria. This would defeat the purpose of the rules. It would prevent citizens from holding governments and companies to account, and rob the world of one of our best chances of cutting the poverty that plagues so many resource-rich countries like Nigeria,” Eagleton continued.

Media reports state that Rilwanu Lukman, Nigeria’s senior-most Oil Minister at the time of Exxon’s deal, refused to endorse the agreement, stating that in his opinion the $600 million renewal fee was too low and would deprive Nigeria of the full benefits the licences. The difference between Exxon’s reported renewal fee and CNOOC’s counter-offer of $3.75 billion is more than Nigeria’s entire health and education budget combined.

“The EU, Canada and Norway have all introduced laws that require oil companies to disclose payments separately from each project. It’s in the interests of citizens, governments and industry alike for the U.S. to follow suit and join the new global reporting standard,” Eagleton added.

Global Witness approached Exxon Mobil with a request for comment on the Nigerian deal. The company stated that following extensive discussions with the Nigerian Government to renew the licences an agreement was reached and legally executed, and that in reaching the agreement Exxon Mobil fully complied with Nigerian law. Exxon Mobil also stated that its investments have generated significant income for Nigeria and promoted economic and social development in the country.

Exxon Mobil

Probe Into Murky Exxon Mobil Deal Shows Need For Tough Oil Transparency Rules

by Global Witness

A major oil deal struck by Exxon Mobil with the Nigerian government is being probed by Nigeria’s Economic and Financial Crimes Commission, a law enforcement agency that investigates high-level corruption.

Exxon Mobil’s deal highlights the need for the U.S. Securities and Exchange Commission to create strong transparency rules for U.S.-listed oil, gas and mining companies under Section 1504 of the Dodd-Frank Act, which are due for release by 27th June 2016.

The new U.S. rules will require extractive companies to disclose details of the hundreds of billions of dollars they pay to governments every year, such as taxes, royalties and licence fees, wherever they operate in the world.

To date there has been very little transparency for extractive companies’ payments to governments, leaving these vast public revenues vulnerable to corruption. The U.S. rules aim to deter graft by enabling citizens to monitor payments and hold their governments and companies to account for how the money is used.

Yet Exxon, a company being investigated for allegedly misleading the public and investors about the risks of climate change,[i] has been calling on the SEC to prevent the U.S. transparency rules from shedding light on precisely the kind of deal it struck in Nigeria that is currently being investigated by anti-corruption enforcers.

ExxonMobil’s Nigerian deal

It was widely reported that in 2009, Mobil Producing Nigeria (MPN), a wholly-owned subsidiary of Exxon Mobil,[ii] agreed to pay $600 million to the Nigerian government to renew its 40% share of three oil licences.[iii] The remaining 60% was held by the state-owned Nigerian National Petroleum Corporation (NNPC).

The deal secured MPN’s interest in some of Nigeria’s largest oil-producing assets, which were reportedly contributing around a quarter of Nigeria’s entire annual output of oil in 2012.[iv]

In June 2015, the Civil Society Network Against Corruption (CSNAC), a Nigerian public interest watchdog,[v] petitioned the Nigerian Economic and Financial Crimes Commission (EFCC) to investigate the deal, claiming that the Ministry of Petroleum valued MPN’s 40% share of the licences at $2.55 billion – much higher than the $600 million that MPN apparently agreed to pay – and that an oil minister had refused to endorse the $600 million fee.[vi]

CSNAC’s petition also states that a Chinese company had offered to pay $4.85 billion for 30% share of the same three oil licences. The company in question is the oil giant CNOOC, China’s second biggest producer of crude.[vii]

Global Witness sources confirm CSNAC’s petition was successful and that the EFCC is currently investigating the deal.

Valuable public assets

A letter seen by Global Witness that appears to be from a representative of CNOOC to the Nigerian government states that CNOOC offered $3.75 billion for a 40% share of the licences.[viii] This is less than the figure stated in CSNAC’s petition, but is still over six times the $600 million fee that was reportedly agreed by MPN. The difference is roughly equivalent to Nigeria’s health and education budget combined.[ix]

The letter, dated July 2015 and addressed to the Nigerian President Muhammadu Buhari, states that the government recommended a renewal fee of $2.75 billion for the licences – an even higher figure than the $2.55 billion reported by CSNAC. The letter goes on to say that the licences were renewed by

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