Aiteo sues Shell for $2.5bn over OML 29 sale

Aiteo Eastern Exploration and Production Company Limited has instituted a court case against Shell Petroleum Development Company of Nigeria (SPDC) seeking over $2.5 billion in compensation for the sale of Oil Mining License (OPL) 29.

Aiteo, in the court action dated July 27, 2021 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/Nigerian National Petroleum Corporation (NNPC) 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, claimed that the defendant breached a fundamental term of the agreement for assignment dated October 17, 2014 as set out in Schedule One Part Three – wells, in relation to the Kugbo West and Okiori oil wells listed in Schedule One 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, among 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 per cent 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 execution of the transaction and acquisition documents and 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.

The SPDC argues that it sold its 30 per cent interest in OML 29 to Aiteo, and the transaction was completed in 2015 in accordance with relevant Nigerian laws. SPDC will defend its position that it fulfilled its obligations under the sale and purchase agreement signed between the parties, and acted in accordance with relevant Nigerian laws.”

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, and 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 per cent participating interest in the wells,” it claimed.

The 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.

The 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, the 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.

The 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 sale 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 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.

The 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 sale 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.


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