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The price was reasonable and appropriate to the characteristics of OPL 245, the terms of the contract, and the development recorded on the oil and gas market over time. IT IS A FALSE CLAIM to state that the cost was inflated.
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The truth
The final price paid by Eni to acquire the exploration rights for the block was fair and reasonable in the light of a number of factors:
- The characteristics of OPL 245
- The terms of the contract
- The development of the Nigerian and international oil market over previous years
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Source: OpenEconomics
A fair financial offer
The section of OpenEconomics’ analysis dedicated to the assessment of the price paid by Eni concludes that the financial offer was fair considering the value of Block 245 and the investment required before development could begin. The final amount paid by Eni to the Federal Government of Nigeria (FGN), calculated upon the outcome of a detailed appraisal of geological, technical, and financial considerations, also took into account the development of the Nigerian and international oil and gas market over the years.
Moreover, the transaction price of $1.09 billion, net of the signature bonus, equals the assessment of OPL 245 made by IHS for Shell in its 2009 arbitration against the FGN, when the British/Dutch company had no interest whatsoever in underestimating the asset to which it was laying claim.
More specifically, according to OpenEconomics, with the investment’s internal rate of return (IRR) at 11.5 per cent, the value of the agreement lies between the minimum amount acceptable to the FGN ($1.241 billion) and the maximum amount payable by the license holder ($2.307 billion), thus just below the median value. With an IRR of 12.5 per cent, the value is somewhere between the aforementioned minimum and a maximum of $1.929 billion, well above the median value.
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OpenEconomics – “OPL 245 block. Assessment of the price paid”
Read the rest of the facts about Block 245
OPL 245 delivers great benefits to the Nigerian population
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Eni made the payment directly to the government
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Eni was unaware of how Malabu used the funds
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Emeka Obi did not act on behalf of Eni
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Eni’s senior management received no bribes
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Eni complied with the audit procedures
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