The federal government’s decision to halt the $1.3bn planned deal between Seplat Energy Plc and US-based ExxonMobil bears a resemblance to what it did to the 2017 farm-out agreement between Chevron and Transnational Energy Limited.
According to the CEO of Nigerian Upstream Regulatory Commission (NUPRC), Gbenga Komolafe, overriding national interest, failure to follow due process and inappropriate application were major reasons for rejecting the deal.
Responding to the development, Ola Alokolaro, senior partner and head of energy and infrastructure group at Advocaat Law Practice, wondered why the NUPRC was just raising those concerns, saying the development might send the deal into a tailspin.
“Conversations with officials of Seplat and ExxonMobil Nigeria clearly indicate that the NNPC was fully aware of the deal since 2018,” Alokolaro said.
International oil companies (IOCs) and local operators do not send a letter to the Nigerian National Petroleum Company (NNPC) or the Ministry of Petroleum Resources without NNPC officials approving every line of the text, a top official of one of the IOCs told BusinessDay.
The relationship private oil companies have with the NNPC is akin to one between a vassal and a sovereign.
“NNPC cannot say it does not know about this deal from day one; it chose the eleventh hour to scuttle it,” said a source with knowledge of the deal.
Other experts who spoke with BusinessDay say the failure of the Nigerian government to speedily approve asset sales is causing a loss of oil revenues amounting to trillions of naira.
“Apart from losing oil revenues, bureaucracy bottlenecks are also costing the government huge damages just like Chevron’s situation in November 2020,” Kelvin Atafiri who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector, said.
Read also: Chevron, ExxonMobil, TotalEnergies, others to pay Nigeria N411bn oil proceeds in May
Chevron and Transnational Energy
Two years ago, a Federal High Court in Abuja restored the Hely Creek and Abigborodo fields in Oil Mining Licence 49 farmed out to Transnational Energy Limited by Chevron/NNPC (Joint Ventures partners) back to Transnational Energy, a partner company of Bresson Energy Limited.
The farm-out, which was concluded in 2017 between Transnational Energy and the JV operators, Chevron Nigeria Limited, was, among other things, for the purpose of providing feedstock to a gas-to-power project developed by Transnational Energy and partners which started in 2012.
In a letter dated February 20, 2017, the Department of Petroleum Resources (DPR) had conveyed a letter of ministerial consent by the Minister of Petroleum Resources approving the farm-out and its terms.
It equally directed the company to pay a prescribed premium to the Federal Government, after which the farm-out would become effective.
Transnational Energy paid the prescribed fee; but in a twist, in January 2019, the late chief of staff to President Muhammadu Buhari, Abba Kyari, wrote a memo revoking the earlier ministerial consent, purportedly on the instruction of the President.
The DPR, without any notice to the farmee (Transnational Energy Limited), put the two fields in the 2020 marginal fields basket, though the fields were not part of the original 57 fields approved for the bid round.
Thep, Transnational Energy Limited, and its sister company in the power business (Bresson A.S. Nigeria Limited) filed a suit FHC/ABJ/CS/1067/2020 in the Federal High Court Abuja to challenge the actions of the respondents – the minister of petroleum resources, the minister of state for petroleum resources, the DPR, the National Petroleum Investment Management Services and the Attorney General of the Federation and Minister of Justice.
In two and a half hours of judgment running to 58 pages, the presiding judge in the case, Justice Taiwo Taiwo, held that the court has jurisdiction because the issue is that of contract. He listed a plethora of authorities to back his judgment.
Justice Taiwo held that the doctrine of presumption of regularity for the action of the DPR in the cases favours the plaintiff.
He further held that Kyari had no locus to act in the manner he did. He counselled government officials to always abide by contracts entered into and not to seek to terminate or abort them after the government has financially benefitted from such contracts and that the sanctity of contract is fundamental to the development of the economy.
The judge also held that the defendants did not challenge the claimant’s deposition and exhibits of its financial statements and therefore, he will be granting the main relief sought and not the alternative reliefs. He awarded $20 million as liquidated damages against the defendants.
Information from the court registry indicates that one of the defendants might have filed a notice of appeal backed by an application of a stay of execution of the judgment.
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