Big business, low profile Shedding light on oil trader Vitol’s operations in Nigeria Saskia van Drunen & Ilona Hartlief & Chinedu Bassey & Ken Henshaw October 2020 Colophon Big business, low profile Shedding light on oil trader Vitol’s operations in Nigeria October 2020 Authors: Saskia van Drunen, Ilona Hartlief, Acknowledgements Chinedu Bassey and Ken Henshaw The authors would like to thank the following Published by: SOMO and CISLAC individuals for their valuable insights and Layout: Frans Schupp thoughtful comments: Rhodante Ahlers, Cover photo: Chunyip Wong Mariëtte van Huijstee, Jorrit Kamminga, Vincent (this picture does not show Vitol facilities) Kiezebrink, Floortje Klijn, Luis Scungio, and ISBN: 978-94-6207-153-7 Anna Zalik. Though the authors benefitted greatly from the insights provided by these individuals, the content of the paper remains the sole responsibility of the authors. Stichting Onderzoek CISLAC Multi nationale Ondernemingen Civil Society Legislative Advocacy Centre Centre for Research on Multinational Corporations Flat 3, No. 16 P.O.W. Mafemi Crescent, Sarphatistraat 30 Off Solomon Lar Way, Behind Chida Hotel 1018 GL Amsterdam Utako District, Abuja, Nigeria The Netherlands T: +234 7034118266 T: +31 (0)20 639 12 91 [email protected] [email protected] https://cislacnigeria.net/ www.somo.nl CISLAC is a non-governmental organisation The Centre for Research on Multinational Corpo- registered in Nigeria. The organisation under- rations (SOMO) is an independent, not-for-profit takes research and advocacy for good governance, research and network organisation working on transparency and accountability in Nigeria, where social, ecological and economic issues related to legislators and policy makers (duty bearers) are sustainable development. Since 1973, the safeguarding citizens’ rights and welfare while organisation investigates multinational corpora- citizens effectively demand accountability. tions and the consequences of their activities for people and the environment around the world. This publication was made possible with financial assistance from the Dutch Ministry of Foreign Affairs. The content of this publication is the sole responsibility of SOMO and CISLAC, and can in no way be taken to reflect the views of this funder. Big business, low profile Shedding light on oil trader Vitol’s operations in Nigeria SOMO and CISLAC Saskia van Drunen, Ilona Hartlief, Chinedu Bassey and Ken Henshaw Amsterdam, October 2020 Contents Executive Summary .................................................................................................... 6 Introduction ............................................................................................................ 14 1 Vitol: the world’s largest energy trader .................................................................... 17 1.1 Vitol’s business model: exploiting price differences ................................................ 17 1.2 Vitol’s use of tax-friendly commodity hubs ........................................................... 18 1.3 Vitol’s financiers: Dutch connections ................................................................... 19 1.4 Vitol’s ownership structure ............................................................................... 23 1.5 Ian Taylor, the man behind Vitol’s growth ............................................................. 23 1.6 Controversies involving Vitol ............................................................................ 24 1.7 Legal, regulatory, and normative framework governing the oil trade .......................... 28 1.8 Vitol’s due diligence for responsible business conduct ........................................... 34 1.9 Conclusion ................................................................................................... 36 2 The Nigerian oil industry: a high-risk sector ............................................................... 38 2.1 Institutions and laws governing the oil sector in Nigeria .......................................... 40 2.2 Contractual arrangements governing the sector .................................................... 44 2.3 A sector affected by corruption, elite capture, and identity politics ............................ 48 2.4 Oil: a source of tensions and conflicts in the Niger Delta ......................................... 52 2.5 Oil production in the Niger Delta: human rights and environmental impacts ................ 53 2.6 Changes in the Nigerian oil industry: new actors and red flags .................................. 56 2.7 Conclusion ................................................................................................... 60 3 Vitol’s operations in Nigeria: main activities and red flags ............................................ 62 3.1 Vitol’s presence in Nigeria: main findings ............................................................. 63 3.2 Controversies involving Vitol in Nigeria ............................................................... 68 3.3 Controversies involving Vitol’s joint venture partner, Oando ..................................... 71 3.4 Controversies involving Shoreline Natural Resources Ltd. ........................................ 73 3.5 Conclusion ................................................................................................... 79 Conclusion and recommendations ................................................................................ 81 Conclusion ........................................................................................................... 81 Recommendations ................................................................................................. 85 Annex 1 – Chronology of Nigerian Governments since independence ................................. 88 2 Acronyms APC All Progressive’s Congress BDP Barrels Per Day BP British Petroleum CAC Corporate Affairs Commission COMD Crude Oil Marketing Division CPI Corruption Perceptions Index DCA Domestic Crude Allocation DPR Department of Petroleum Resources DSDP Direct Sale of crude oil and Direct Purchase of Products EFCC Economic and Financial Crimes Commission EITI Extractive Industries Transparency Initiative ESG Environment, Social and Governance EU European Union FATF Financial Action Task Force FDFA Federal Department of Foreign Affairs (Switzerland) FIRS Federal Inland Revenue Service GMoU Global Memorandum of Understanding GNPC Ghana’s National Petroleum Corporation HDI Human Development Indicator HEOSL Heritage Energy Operational Services Ltd. HMRC Her Majesty’s Revenue and Customs HSE Health, Safety and Environment HSEC Health, Safety, Environment and Community IFC International Finance Corporation IOC International Oil Company JOA Joint Operating Agreements JMLSG Joint Money Laundering Steering Group KPI Key Performance Indicator LNG Liquefied Natural Gas LPG Liquefied Petroleum Gas LUA Land Use Act MNC Multinational Corporation MOSOP Movement for the Survival of Ogoni People NAPIMS National Petroleum Investment Management Services NDDC Niger Delta Development Commission NEITI Nigeria Extractive Industries Transparency Initiative NGO Non-Governmental Organisation NLNG Nigeria Liquefied Natural Gas NNPC Nigerian National Petroleum Corporation NPDC Nigerian Petroleum Development Company NRGI Natural Resource Governance Institute NUPENG National Union of Petroleum and Natural Gas Workers OCTP Offshore Cape Three Points 3 OECD Organisation for Economic Co-operation and Development OECD Guidelines OECD Guidelines on Multinational Enterprises OML Oil Mining Lease OPA Offshore Processing Agreement OPEC Organization of the Petroleum Exporting Countries OPL Oil Prospecting License PDP People’s Democratic Party PdVSA Petróleos de Venezuela PEP Politically Exposed Person PHCDB Petroleum Host Communities Development Bill PIB Petroleum Industry Bill PIGB Petroleum Industry Governance Bill PPMC Pipelines and Product Marketing Company PRSTF Petroleum Revenue Special Task Force PSC Production Sharing Contracts RPEA Refined Products Exchange Agreements SAA Strategic Alliance Agreements SDC Stakeholders Democracy Network SEC Securities and Exchange Commission SECO State Secretariat for Economic Affairs (Switzerland) SOE State Owned Enterprise TAM Turn Around Maintenance TFP Trans Forcados Pipeline TUC Trade Union Congress UAE United Arab Emirates UNGP United Nations Guiding Principles on Business and Human Rights 4 Figures, maps, and tables Tables Table 1 Overview of syndicate credit facilities provided to Vitol’s group of companies in 2015-2019 which were participated by the Dutch ING, ABN AMRO and Rabobank .... 22 Table 2 Acts regulating the oil industry in Nigeria ........................................................... 43 Table 3 Overview of directors Calson (Bermuda) Limited .................................................. 64 Figures Figure 1 Corporate Structure Vitol Holding II SA ............................................................. 20 Figure 2 Structure of oil industry operations ................................................................... 41 Figure 3 Formal institutions governing the Nigerian oil sector .............................................. 42 Maps Map 1 Map of Nigeria ........................................................................................... 39 Map 2 Load ports used by Vitol in Nigeria ................................................................... 67 Map 3 The Niger Delta .........................................................................................