The nerve of a super fraud: Aiteo slams $2.5bn suit against Shell over sale of OML 29 - SALIENT TIMES ONLINE

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Monday, 4 October 2021

The nerve of a super fraud: Aiteo slams $2.5bn suit against Shell over sale of OML 29


...Allege Fraud, Deceit, Misrepresentation

...Seeks compensation As DPR Awards Kugbo West Marginal Field In OML 29 To 7 Waves Petroleum


Fortune and fraud are often in business, uneven cardinal elements; one speaks to value and the other, a vice. Fraught in its pursuit of these discordant factors, the Shell Petroleum Development Company (SPDC), has once again, waded into the eye of the storm. Ultimately, it committed the impious fraud of industry in its sale of the OML 29 to Aiteo Eastern Exploration and Production Company Limited in 2014.


The SPDC perpetrated the contradiction of a business culture that cultivates sincerity and is at the same time manifests a fraud. Ask Aiteo.


The latter has dragged Shell to court over what it alleged as “fraud, deceit, and misrepresentation” in the sale.


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 well s listed in schedule 1 of the agreement for assignment.


It accuses SPDC 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.


Shell Petroleum’s conduct was no doubt an invitation for a lawsuit. Describing the oil giant’s action as a “fraudulent misrepresentation,” Aiteo is seeking, among others, the payment of over $2 billion from Shell in general and other collateral damages as a result of the alleged lies and deceit at the time of the sale. 


Trouble reared its ugly head immediately Aiteo discovered that the SPDC, 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.


The flames of discord flared and burned brightly between the parties in the wake of a letter dated September 16, 2021, and titled, ‘2020 Marginal Field Bid Round Award Of Kugbo West Marginal Field Located In OML 29 to 7 Waves Petroleum Limited’, from 7 Waves Petroleum Limited, informing 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 signed by Daniel Alabi, Managing Director, 7 Waves Petroleum Limited, stated in part:


“7 Waves Petroleum Limited actively participated in the 2020 Marginal field bid round conducted by the Department of Petroleum Resources [DPR] and emerged as the awardee with 100 percent equity interest in Kugbo West Marginal Field in OML 29 upon payment of the statutory signature bonus. The field would be jointly operated with our partner ‘Multiplan Nigeria Ltd’.


“Our firm would be glad to discuss and engage with Aiteo Eastern Exploration and Production Company Limited being the leaseholder for OML 29 with the underlying objective of executing the required Farmout Agreement thus (to) enable our firm commence field development activities essential to meet the timeline set by the DPR.


“We would be glad to set up an introductory meeting to discuss the next steps, kindly notify our firm of a suitable date and time. Thank you for the assistance, we look forward to a mutually beneficial and long-lasting working relationship.”


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.


The SPDC was the legal and beneficial holder of a 30 percent 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.


Aiteo claimed it did not only join others to bid for OML 29 but emerged successfully. “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.


Aiteo claimed that “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.”


Consequent upon the SPDC’s deceit, Aiteo claimed 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, as it is unable to fully repay its alleged indebtedness to its financiers due to the wrongful actions of the SPDC.


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 percent 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.


Aiteo is also praying the Federal High Court to order Shell Petroleum to refund to it, 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.


Aiteo 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 the SPDC 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.


Its alleged bullying tactics and exploitation of legal technicalities in the production and evacuation of crude oil to allegedly short-change not only the Federal Government but also local operators in the oil and gas business were clearly nipped in the law court.


The SPDC was also 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 steal crude and cheat local operators.