Financial Energy Review
Aiteo Eastern Exploration and Production Company Limited has instituted a legal action against Shell Petroleum Development Company of Nigeria, seeking the sum of over $2.5 billion compensation over the sales of Oil Mining Licence 29.
Aiteo in the court action dated July 27, 2021 as accusing Shell of selling two Marginal Fields – Kugbo West and Okiori to it when it, “knew or ought to have known that the defendant had handed over the wells to the federal government of Nigeria\Nigerian national petroleum corporation for which the defendant received valuable consideration in or about 2009 prior to the agreement for assignment.
The plaintiff in the suit marked, FHC/ABJ/C8/738/2021, and filed by its lawyer, Kemi Pinheiro, SAN, is claiming that the defendant breached a fundamental term of the agreement for assignment dated October 17, 2014 as set out in schedule 1 part 3 – wells, in relation to the Kugbo West and Okiori oil well s listed in schedule 1 of the agreement for assignment.
Shell was the legal and beneficial holder of a 30 per cent undivided participating interest in OML 29, which is part of the undivided percentage interest held by the defendant in conjunction with TEPING, NAOC, NNPC amongst others.
Prior to the assignment of the lease to Aiteo, Shell as the operator of OML 29 published Information Memorandum in October 2013 wherein it invited bids from interested entities for the acquisition of their joint undivided 45 percent participating interest in OML 29.
The plaintiff claimed it did not only join others to bid for OML 29 but emerged successful.
“As consideration for the agreement, the plaintiff made the following respective payments of; $220,000,000.00 as deposit pending the negotiation, completion and execution of the transaction documents and relevant agreements and the balance of 2,130,000,000.00 upon the execution of the transaction and acquisition documents and the agreement,” it stated.
Plaintiff further averred that based on the agreement for assignment dated October 17, 2014, the defendant in conjunction with TEPING and NOAC as Assignors transferred to it their entire participating interest in OML 29 together with the rights, interest, obligations thereto and in the process purportedly also transferred their participating interest in the wells, “when they knew or ought to have known that they had surrendered and given the wells to the NNPC/ the federal government about five years earlier for valuable consideration”.
While Aiteo claimed its bid for the acquisition of OML 29 was based upon a complete reliance on the representations in the electronic data room information, IM and the Agreement, particularly as they concern the wells contained within OML 29, it noted that issues came up in 2020 when it wanted to commence work on the assigned wells.
“The plaintiff found that the wells had been earlier, re-conveyed by the defendant to the NNPC on or about 2009,” it added.
According to the plaintiff the said re-conveyance of the wells were done (ostensibly by way of offsetting the defendant’s incurred liabilities to the NNPC under the JOA operated by the defendant, adding that the wells were then offered to prospective buyers during the just concluded 2020 bid round conducted by the Department of Petroleum Resources.
“In the circumstances therefore, the plaintiff avers that the representations made by the defendant as aforesaid were made falsely, deceitfully and fraudulently with the intention of depriving the plaintiff the full benefit of the assets and the undivided 45 percent participating interest in the wells,” it claimed.
Plaintiff further claimed that as a result of the deceit, its expectations as it relates to the wells can no longer be achieved and that its financial position has been severely and adversely impacted upon.
Plaintiff averred that its inability to fully repay its alleged indebtedness to its financiers was directly attributed to the wrongful actions of Shell. While claiming that it paid the sum of $46.2 million for the wells, plaintiff argued if the money had been invested in other business ventures at the rate of 9.9 per cent interest rate per annum from 2014 till the commencement of the suit it would have yielded an additional sum of $52 million.
Plaintiff therefore claimed that it is entitled to a refund of $99 million.
It also argued that although by clause 25 of the agreement, disputes emanating from the said agreement ought to be resolved through arbitration but since the fraudulent misrepresentation of the defendant goes to the root of the agreement to the sales of the wells it can not be entertained or determined by an arbitration tribunal.
Aiteo is therefore praying the Federal High Court to order Shell to refund him the sum of $46.2 million as payment attributable to Kugbo West and Okiori oil wells being money had and received for a consideration which has totally failed.
Plaintiff is also asking for another sum of $52 million being the interest that ought to have accrued on the sum paid on the two wells.
While it is claiming the sum of $500,000 general damages, it is also seeking the payment of $2.1 billion as the amount it would have derived from the sales of 32,000,000 barrels of crude oil and other petroleum products from the Kugbo West and 41,000,000 barrels of crude oil and other petroleum products from Okiori wells.
In 2015, shell reported that it had completed the assignment of its interest in oil OML 29 and the Nembe Creek Trunk Line (OML29 and NCTL) to Aiteo in total cash proceeds of some $1.7 billion.
It stated that the divestment was part of the strategic review of SPDC’s onshore portfolio and in line with the federal government’s aim of developing Nigerian companies in the country’s upstream oil and gas business.
OML29 covers an area of 983 square kilometres and includes the Nembe, Santa Barbara and Okoroba fields and related facilities and has a capacity of 600 thousand barrels per day.
In February this year, a Federal Court in Lagos, had issued an injunction barring Shell subsidiaries from withdrawing money in 20 local banks until it ‘ringfences’ potential damages in a lawsuit brought against the oil major by Aiteo.
In the case, the company was seeking about $4 billion in total over alleged problems over claims Shell undercounted its oil exports through deliberate improper metering of the Nigerian company’s oil exports from the Bonny Light terminal.
