Unaoil, the energy consultancy at the centre of a corruption trial, “desperately sought” to work with a manufacturer it had previously labelled “incapable” of executing a major oil pipeline project in Iraq as its executives stood to benefit financially, jurors heard today (4 March).
After its first-choice engineering partner J Ray McDermott – now known as McDermott – pulled out of a tender for the infrastructure contract in early 2010, the Monaco-based firm was “immediately on the line” to former competitor Leighton Offshore trying to “strike a deal”.
The significance, argued Michael Brompton QC, who is prosecuting a case against three former Unaoil associates on behalf of the UK’s Serious Fraud Office (SFO), is that the company had previously portrayed Leighton as “unsuitable” for carrying out the pipeline work on behalf of Iraq’s state-owned South Oil Company (SOC), and had tried to discredit it during the bidding process.
So the decision to support Leighton when McDermott withdrew its involvement contradicts the argument by one of the defendants that Unaoil was always acting with the country’s best interests in mind.
“What Unaoil’s people were interested in was a deal from which they could benefit, irrespective of whether it benefitted SOC,” said Mr Brompton.
Unaoil earned $110m from Iraq pipeline venture with Leighton
The prosecutor spoke at London’s Southwark Crown Court at the trial of the former Unaoil associates, who stand accused of conspiracy to make corrupt payments in Iraq between 2005 and 2011. All three deny the charges.
The SFO’s case revolves around a $4.5bn project led by SOC to award contracts for a major oil infrastructure upgrade.
The Iraq Crude Oil Export Expansion Project (ICOEEP) was conceived as a way to increase the country’s crude export capacity from 1.8 million barrels per day (bpd) to 4.5 million bpd in the south of the country following the US-led invasion that toppled Saddam Hussein.
Leighton was ultimately awarded the $733m contract by SOC to build two 48-inch pipelines linking the Persian Gulf and offshore moorings in southern Iraq, with Unaoil its consultant in the process as well as the sub-contractor appointed to handle the onshore aspects – a role that eventually earned it $110m in fees, according to the SFO.
Ziad Akle, 45, was Unaoil’s territory manager for Iraq; Stephen Whiteley, 65, was Unaoil’s general territories manager for Iraq, and formerly a vice-president of SBM Offshore; and Paul Bond, 68, was a senior sales manager for SBM Offshore.
McDermott’s withdrawal left Unaoil scrambling for a new partner
SBM Offshore was a manufacturer of single point moorings (SPM) equipment and had worked with Unaoil in an earlier tender negotiation for the ICOEEP, in which the energy consultancy is accused of biasing the contractor selection process in favour of its client.
The winning formula was being repeated with J Ray McDermott, argued Mr Brompton, until the “shocking news” that the Houston-based firm it was backing had decided to pull out of the process at a late stage.
He added: “Having lost J Ray McDermott as a proposed partner, Unaoil was desperately seeking a new one. It was immediately on the line to Leighton to see if they could strike a deal together.
“Leighton was the only party left which Unaoil might be able to do a deal with.”
He said Italy-based Saipem, the other company on the three-strong shortlist, had been unwilling to do a deal with Unaoil.
But given Saipem’s strong reputation in the industry and track record with pipeline work, the prosecutor suggested the advice of Unaoil executives to SOC – if SOC was in fact the top priority – should have been to “go with Saipem” given the fact it had previously labelled Leighton as “not capable of doing the job”.
Responding to the prosecutor’s questioning, Akle said his colleagues’ opinion “seems to have changed, maybe for good reason” by March 2010.
“It’s natural that Unaoil approached all parties,” he added.
The trial continues.
