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Shell’s Dishonesty in Sale of OML 29 to Aiteo .Firm accuses multinational of fraud, deceit and misrepresentation in court papers, demands $2.5bn in compensation

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In a 2014 interview of former British High Commissioner to Nigeria, Dr. Andrew Pocock, this writer confronted the senior envoy with the discernible disparity Shell Petroleum Development Company of Nigeria displayed with respect to global best practices in its operations in the Niger Delta region in contrast with British oil exploratory and extraction activities in the North Sea.
It should be interesting to get Dr. Pocock’s reaction to the current energy sector controversy where Aiteo Eastern Exploration and Production Company Limited has sued Shell, seeking over $2.5 billion compensation over the latter’s seemingly dodgy sale of two Marginal Fields in Oil Mining Licence (OML) 29, before it eventually sold to Aiteo without full disclose of that information. Instead, it priced the two fields as part of the whole package for sale to Aiteo.

In its court action dated July 27, 2021, Aiteo accused 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.

In a suit, FHC/ABJ/C8/738/2021, dated July 27, 2021, and filed before a Federal High Court in Abuja, by its lawyer, Kemi Pinheiro (SAN), Aiteo 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 wells listed in schedule 1 of the agreement for assignment.

Aiteo accuses Shell of failing to fully disclose the true nature of the oil wells to it, at the time of the sale, despite receiving the full payment for the transaction and alleged “fraud, deceit, and misrepresentation” in the sale.

A budding crisis emerged immediately Aiteo discovered that the Shell, from whom it bought the OML 29 in 2014, had transferred the Kugbo West and Okiori Marginal Fields to the Department of Petroleum Resources (DPR) without disclosing this during the negotiations that led to the purchase of the asset.

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 (Aiteo) 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.

The 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 a miffed Aiteo, 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.

Aiteo further 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, Aiteo argued that 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. The energy sector giant and local content champion 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 cannot be entertained or determined by an arbitration tribunal.

Aiteo is therefore praying the Federal High Court to order Shell to refund it the sum of $46.2 million as payment attributable to Kugbo West and Okiori oil wells being money it had received for a consideration which has totally failed.

The company 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.

It would be recalled that 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.

It could be recalled that 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 that particular case, Aiteo was seeking about $4 billion in total claims against Shell, alleging that Shell undercounted its oil exports through deliberate improper metering of the Nigerian company’s oil exports from the Bonny Light terminal.

Looking at the big picture, Shell’s curious move spawns several posers, especially against the background that Aiteo is the biggest indigenous player and foremost local content champion for the strategic energy sector in Nigeria. Volatilities and instability, driven by the new Euro-American new nationalism and protectionism have been injected into the energy sector. Worse, this scenario has hardly been helped by the COVID-19 pandemic that roiled the planet.

In concert, these conditions have prostrated many global companies and could trigger seismic shocks that could endanger Aiteo itself.

A broad range of concerned stakeholders are asking – why should Shell have transferred the Kugbo West and Okiori Marginal Fields to the Department of Petroleum Resources (DPR) without disclosing this during the negotiations that led to the purchase of the asset?

Why should Shell fail to fully disclose the true nature of the oil wells to Aiteo, at the time of the sale, despite receiving the full payment for the transaction?

The whole devious script apparently unravelled when a letter dated September 16, 2021, and titled, ‘2020 Marginal Field Bid Round Award Of Kugbo West Marginal Field Located in OML 29 from 7 Waves Petroleum Limited, informed Aiteo that a section of the controversial OML 29 now belongs to 7 Waves, courtesy of the 2020 Oil Bid Round conducted by the Department of Petroleum Resources (DPR). The letter was signed by Daniel Alabi, Managing Director, 7 Waves Petroleum Limited.

Aiteo had earlier received the rude shock when DPR notified it of the new development in a letter dated August 3, 2021 and signed by Edu Inyang for Director/CEO, DPR.

Despite Dr. Pocock’s denial of disparity in global best practices by Shell vis-à-vis what is obtained in North Sea oil exploration, it would be recalled that Shell suffered a huge legal blow earlier in the year, as a court in The Netherlands, compelled it to compensate two Nigerian farmers for damages over 2004/2005 oil leaks.

Shell has also been mired in a missing crude oil scandal by the local regulator, the Department of Petroleum Resources (DPR) through an illicit metering system, which it allegedly deployed to under-declare crude extraction and cheat local operators.

As things stand, the ball is in the court of law.

 

By: Tolu Adeyinka

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Yahaya Bello and the EFCC Quandary: The Devil is in the Details – Ayoola Ajanaku

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The dust is yet to settle, following the efforts of the Economic and Financial Crimes Commission (EFCC) to arrest the immediate past governor of Kogi State, Yahaya Bello last week, on the heels of the anti-graft agency preparation to arraign him over corruption charges. This development is more than what meets the eye, as it’s laden with intricate details that are the kernel of this lucid treatise.

The attempt to arrest the ex-governor led to the gestapo like siege to his residence located in Wuse Zone 4, FCT earlier. Officials of the EFCC cordoned off the road and entrance to the residence of the former Kogi State governor for most of Wednesday.

Despite the heavy presence of EFCC operatives around Bello’s residence, his successor in office, Usman Ododo, paid him a solidarity visit. Ododo arrived the erstwhile helmsman’s residence in the afternoon and was cheered by the loyalists of the former governor who were present to give support to their embattled principal.

Also, while the siege on Bello’s residence was still on, two conflicting court rulings emerged in respect to the attempt to arrest of the former governor by the EFCC. One of the rulings, which came from a Kogi State High Court sitting in Lokoja, restrained the EFCC from arresting, detaining or prosecuting Bello.

Justice I.A Jamil, who gave the order in a ruling last week, stated that infringing on the fundamental human rights of the former Kogi helmsman is null and void except as authorised by the Court.

“By this order, the EFCC is hereby restrained from arresting, detaining and prosecuting the applicant except as authorised by the Court.

“This is a definite order following the earlier interim injunction given,” he averred.

In another twist in the yoyo-like locomotion of multiple judicial pronouncements, however, the EFCC obtained permission from the Federal High Court sitting in Abuja to arrest the ex-Kogi State governor in preparation to his arraignment on Thursday.

Justice Emeka Nwite granted the warrant this afternoon at the instance of the EFCC.

Love or hate Yahaya Bello, the pertinent questions begging for answers in this litigation are:

The EFCC had in March indicted Yahaya Bello, in an alleged diversion of about N100 billion, an offence said to have been committed months before he assumed office as governor in September 2015. If any third party dissects the budgetary appropriation of Kogi State and it’s IGR dispassionately then the numbers do not add up. The former helmsman meet a humongous liabilities and backlog of non-serviced facilities accruing to the Confluence State that had to be serviced. The pervasive prevarication that colossal funds found it’s into his pockets amount to ‘Alice in Wonderland’ tales.

The anti-graft agency had joined Yahaya Bello in the amended suit alongside the Chief of Staff to Kogi State Governor, Alli Bello, and one Daudu Suleiman, who was re-arraigned by the anti-graft agency before Justice James Omotoso of the Federal High Court, Abuja.

The ex-governor was not a defendant in the original suit, and was not in court on the said day.

Justice Omotoso had granted an accelerated hearing in the matter and had also ordered that all forms of objections must be kept in abeyance till the address stage and the charge were read to them.

In the first count, the former governor, and the two suspects were accused of conspiring with each other in September 2015 and converting N80, 246, 470, 089 to their personal use. For contextual and editorial alignment, the goalposts of allegations have witnessed shifting and amendments.

What court Order did the EFCC appeal against as well as the reason behind it?

It is a germane fact in public domain that the EFCC appealed against the Order granted on the 9th of February, 2024 by the High Court of Kogi State, the said order was an order restraining the EFCC from inviting, arresting or detaining the Applicant vide Notice of Appeal filed on 26th February, 2024.

Also, the EFCC further asked for a stay of Execution of the Interim Order at the Court of Appeal on 21st of March, 2024, which request was refused by the Court of Appeal.

However, on the 6th of March, 2024, in defiance of the interim Orders and their own pending appeal against the interim Order, the EFCC proceeded to prefer a 17 Count(s) Charge before Justice Nwite of the Federal High Court against Yahaya Bello.

The EFCC went further to resort to self help when on the 17th of March, 2024, it approached the same Federal High Court, Abuja, via an Ex-parte application and without informing the said court of the interim Order and their pending appeal against the interim order, to obtain an arrest warrant against the same person in respect of whose Order they had appealed to the court of appeal.

Akin to the above, if indeed the EFCC has nothing to conceal, why are they trying to muddle up the issues on account of the main judgement that was also subsequently delivered in the same High Court of Kogi State without recourse to the interim order that they appealed against and requested to be stayed, which request was refused?

The EFCC claims to have extended invitation to Yahaya Bello’s quarter immediately after his tenure elapsed on January 27th 2024. He has challenged the anti-graft agency to produce a copy of this invitation, including the delivery date and the recipient’s name and endorsement. There’s ample confidence on his part that they cannot provide ample evidence to this effect.

This sudden attempt at trying to confuse unsuspecting public with sentimental press statements and mug shot poster emblazoned with wanted message in capital letters. These actions intended to impugn and malign Yahaya Bello would not help them clear the infraction and abuse of the judicial process to give a dog a bag name to hang it. It’s a recurring decimal and standard MO of the anti-graft agency to embark on the route of smear campaign on suspects in a bid to gain an edge in the gallery of public opinion.

Again, by the admission of EFCC to the effect that they were at the Court of Appeal on the matter, and at the same time, approached a Federal High Court without informing the court of the subsisting order and appeal, is an admission of abuse of judicial process, and a fraudulent deceit of the court that has led it to granting conflicting Orders while appeal was pending.

This approach is a grave infraction of due process of law, subsequently, the statement issued by the learned counsel representing EFCC in the said matter amounts to trying to justify the infraction in a media trial which is unethical and not allowed or recognized in the legal profession.

The NJC should seriously investigate this matter as the conduct of the EFCC lawyer is clearly unethical and smirks of “Jankara” and “Boju Boju” practice of circumventing due course of the law.

The EFCC had appealed the order on March 11, 2024 and sought a stay of execution in Appeal No: CA/ABJ/CV/175/2024: Economic and Financial Crimes Commission v. Alhaji Yahaya Bello. The Court of Appeal did not grant the stay of execution, but fixed yesterday for hearing.

The appeal, however, failed to take place as the registrar told journalists that the appeal was not listed among the cases for the day.

The latest development in this jurisprudential tango, the embattled immediate past Governor of Kogi State, Yahaya Bello said he was ready to appear before the Federal High Court in Abuja to answer to the 19-count charge the Economic and Financial Crimes Commission, EFCC, preferred against him.

Though Bello was absent for his arraignment, he briefed a team of lawyers who addressed the court on his behalf on Tuesday. A member of his legal team, Mr. Adeola Adedipe, SAN, told the court that his client would have made himself available for the proceedings, but all he clamours for is the strict adherence to the rule of law.

“The defendant wants to come to court but he is afraid that there is an order of arrest hanging on his head,” Adedipe, SAN, submitted.

Consequently, he urged the court to set aside the exparte order of arrest it earlier issued against the former governor.

Adedipe, SAN, contended that as at the time the order of arrest was made, the charge had not been served on his client as required by the law.

He noted that it was only at the resumed proceedings on Tuesday that the court okayed substituted service of the charge on the defendant, through his lawyer.

“As at the time the warrant was issued, the order for substituted service had not been made. That order was just made this morning.

“A warrant of arrest should not be hanging on his neck when we leave this court,” counsel to the defendant added.

Time will tell where the pendulum will swing, as Yahaya Bello is fighting a battle of his life to untangle himself from the charges filed by the Nigeria’s anti-graft agency earlier that has caught the attention of all and sundry.

In a nutshell, the pontification of prominent Lutheran pastor in Germany, Martin Niemoller rings a bell in this scenario. “First they came for the socialists, and I did not speak out—because I was not a socialist. Then they came for the trade unionists, and I did not speak out -because I was not a trade unionist. Then they came for the Jews, and I did not speak out – because I was not a Jew. Then they came for me – and there was no one left to speak for me.”

Regardless of his exact words, Niemöller’s message remained consistent: he declared that through silence, indifference, and inaction worse things happen. Alas, reverse is the case as in this part of the world an individual is not presumed innocent until proven guilty. The hounds and irate mob are out and baying for blood aided by apparatus of power with a predetermined ploy to have Yahaya Bello’s head on a plate via the guillotine.

Ayoola Ajanaku is a Communications and Advocacy Specialist based in Lagos, Nigeria.

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Breach of contract: Shell sues Venture Global in US court

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•As NLNG risks sanctions from UK court

Following restriction of Liquefied Natural Gas LNG supply to its customers, Shell PLC has made claims against Venture Global LNG(VGL) a United States based LNG exporter, for its breach of contract to supply LNG cargoes.

Also, Nigeria LNG may risk sanctions from a UK High Court for a similar breach of an LNG supply contract.

Both Venture Global LNG and NLNG have been facing hurdles in the United States and in the United Kingdom for its breach of contract in a relatively similar fashion.

While Shell Plc filed its claim with U.S. regulators, the NLNG breach, has now been advanced to the UK High courts for further litigation.

Nigeria LNG is challenging the enforceability of the arbitral award’s demand order, issued by the arbitration panel.

According to Reuters report, Shell Plc has escalated its dispute with Venture Global LNG.

It accused the liquefied natural gas producer of restricting supply access to it and other customers, while exporting over $18 billion in LNG.

In a letter sent to the Federal Energy Regulatory Commission, Shell requested the commission to compel Venture Global LNG to disclose plant commissioning data to clarify the cause of delayed commercial operations.

Shell and other European companies say they contracted with Venture Global LNG but did not get their gas cargoes under long-term contracts.

They alleged that Venture Global LNG has been selling gas from the plant for more than a year to others, costing them billions in lost profit.

On its part, Nigeria LNG was held to be in breach of contract by failing to deliver 19 cargoes under a contract it executed in January 2020.

The cargoes, which were due for delivery between October 2020 and October 2021, have not been delivered.

In pleadings made by NLNG in its Particulars of Claims to the High Court of Justice in England and Wales Commercial Court, it’s breach was confirmed by a final arbitration award dated 30th January 2023.

The arbitration tribunal comprised Mr John Beechey CBE, Mr J William Rowley KC and Mr Nevil Phillips.

Nigeria LNG Ltd., is significantly owned by Shell, Total, and Eni.

An industry expert cited similarities between the disputes involving Venture Global LNG and Nigeria LNG. The source attributed the challenge to the unexpected surge in the LNG market.

“The reason for this surge in disputes may be related to the unexpected turn in losses to highly profitable margins, as high as $90 million per cargo, at the beginning of the Russian Ukraine conflict, post Covid market recovery and a huge demand in Asia and European markets, it is seen as a golden era for LNG cargoes.

“This situation may have prompted numerous defaults on agreements, with major LNG suppliers opting to retain higher margins at the risk of lengthy litigations,” the source added.“

 

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We Have Put in Place definitive measures to Bolster our Production’ – Oando GCE, Wale Tinubu  

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After releasing the FY 2022 financial statements, Oando Plc has issued a press statement to address its net loss of N81.2 billion incurred in 2022, citing militancy and pipeline vandalism as major culprits.

Despite reporting a gross turnover of N1.99 trillion during the fiscal year, the group posted a loss after tax of N81.2 billion, a significant downturn from the N39.2 billion profit after tax posted in 2021.

Wale Tinubu, Group Chief Executive of Oando Plc, commenting on the result, noted,

“The heightened militancy and pipeline vandalism acts within the Niger Delta region dealt a substantial blow to our upstream operations, resulting in a marked reduction in our crude production volumes due to the protracted shut-ins for repair following each incidence. This was further compounded by a major gas plant fire incident which also necessitated a lengthy downtime.”

“Furthermore, a rise in our net interest expense due to increased interest rates on several of our major facilities in line with global rates increases, also contributed to our Loss after Tax position.”

“In response, we have put in place definitive measures to bolster our production and cash inflows towards ensuring a speedy return to profitability by collaborating with our partners to institute a comprehensive security framework aimed at permanently curbing the persistent pipeline vandalism whilst concurrently exploring inorganic growth opportunities to increase our reserves and production capabilities. We have also implemented a strategic restructuring of our key facilities to ensure they align with our cash flow dynamics.”

Recommended reading: Pipeline vandalism cost Nigeria N471 billion in 5 Years

Economic implication of oil theft in Nigeria

Theft and vandalism of oil installations is a major problem plaguing the oil and gas sector in Nigeria. The crime of oil theft has had a negative impact on the national economy and the business of local and international oil companies operating in the upstream sector.

Although there is no precise figure to quantify the financial impact of oil theft on the Nigerian economy, a study conducted by Dimkpa et al. (2023) estimates that Nigeria lost approximately $33.6 billion in oil revenue to oil theft between 2019 and 2022.

 A significant economic implication for Nigeria has been the consistent decline in oil production. Nigeria’s average oil production in 2022 was at 1.45 million barrels per day, an almost 1-million-barrel decline from the 2.4 million barrels per day produced by Nigeria in 2012.

In 2022, Oando’s total upstream production amounted to 20,703 barrels of oil equivalent per day (boe/day). This comprised 4,939 barrels per day of crude oil, 472 barrels per day of natural gas liquids, and 15,292 barrels per day of natural gas.

This figure represents a 22.7% decline from the 26,775 boe/d output reported by the group in 2021.

According to the company’s press statement, the decline in production was attributed to downtimes caused by shut-ins for repairs and sabotage activities.

In 2022, Oando Plc sold approximately 21.8 million barrels of crude oil, representing a 25% increase from the 17.4 million barrels sold in 2021. The group also sold about 1.94 million metric tonnes of refined petroleum, representing a 101% increase from the 962,371 metric tonnes sold in 2021.

Despite recording a decline in oil output, the group was able to sell an increased amount of crude oil due to its contracts with the then Nigerian National Petroleum Corporation (NNPC), ultimately contributing to its 148% revenue growth in 2022.

In 2022, Oando sold crude oil at an average realized oil price of $101.55/barrel and a gas price of $14.74/Boe, compared to 2021’s prices of $62.14/barrel for crude oil and $9.95/Boe for gas.

OMLs 60 to 63 gulped about $77.7 million in capital expenditure (CAPEX) from Oando, while OML 56 and OML 13 gulped about $22.6 million and $200,000 respectively. The group also spent $1.4 million in capital expenditure (CAPEX) on other assets.

As of 2022, Oando owned 20% stake in OMLs 60 to 63, as Nigerian Agip Oil Company (NAOC) also owned a 20% stake.

However, Oando is in the process of purchasing NAOC’s 20% stake in the oil fields, which will push its stake up to 40%.

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