$62bn oil revenue: FG’s recovery effort suffers setback

THE PUNCH Newspaper- Ade Adesomoju, Abuja

The Federal Government, through the Attorney General of the Federation and Minister of Justice, Mr Abubakar Malami (SAN), may have beaten a retreat from its fight to recover an estimated $62bn in accrued revenues from some international oil majors, Saturday PUNCH learnt during the week.

Before the withdrawal, the AGF had argued that the revenue accrued because successive administrations neglected key aspects of the Production Sharing Contracts between the Federal Government and the IOCs, bordering mainly on the sharing formula between the government and the IOCs.

Malami recently stated that the expected funds had been earmarked for major ongoing infrastructural projects in the country, including the Lagos-Ibadan Expressway, Kano-Abuja Expressway and the Second Niger-Bridge.

Going by the Central Bank of Nigeria’s current official exchange rate of N379 to $1 as of Friday, the $62bn at stake amounts to about N23.5tn.

The Federal Government had alleged that Shell Nigeria Exploration and Production Company Limited, the Nigerian arm of the global IOC, was responsible for $13.5bn of the total revenues denied Nigeria.

During the week, Saturday PUNCH obtained correspondences between Malami and Shell that gave insight into the squabble, government’s recovery efforts and Nigeria’s about-turn.

Nigeria’s volte face

On March 13, 2020, Malami wrote to Shell and appealed to the oil and gas giant to withdraw its suit and arbitration proceedings instituted against the Federal Government for demanding the company’s share of the $62bn.

The AGF then asked the oil company to engage with regulatory agencies “to remedy any possible lapses over the implementation of the Production Sharing Contracts in Nigeria and possible negotiation on terms of payment.”

Meanwhile, in its reply to the AGF, Shell’s Managing Director, Bayo Ojulari, in a letter dated May 11, 2020 and signed by him, received by the AGF’s office on May 13, 2020, indicated that the dispute was “created by the Federal Government’s demand for alleged outstanding revenue from OML 118”, but that it “has now been resolved by the withdrawal of the FGN’s demand as effected by your referenced letter.”

The five-paragraphed letter however glossed over the said negotiation plan without giving it any mention.

How states initiated suit over unremitted funds

Oil-bearing Akwa Ibom, Bayelsa and Rivers states had in 2016 instituted a suit at the Supreme Court against the AGF, contending that the Federal Government had been short-changed of its supposed share of oil revenue under the Production Sharing Contracts for the period between 2003 and 2015.

According to them, the huge loss suffered by the Federal Government was due to the failure of successive Ministers of Petroleum Resources for over 15 years to kick-start the re-adjustment of the sharing formula (the PSC), which was 60 per cent share of oil profits to the Federal Government and 40 per cent to the oil companies.

The three states argued that this violated the provision of section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act.

The AGF did not oppose the suit as he subsequently entered into an agreement with the three states leading to their filing of terms settlement at the Supreme Court on April 6, 2018.

By virtue of the agreement between the three states and the Federal Government, the AGF was to work with the three states to immediately set up a body and the necessary mechanism for recovery of the lost revenue since August 2003.

A seven-man panel of the apex court led by then Chief Justice of Nigeria, Justice Walter Onnoghen (retd), adopted the terms of settlement and delivered it as a consent judgment on October 17, 2018.

The apex court in the judgment ordered the Federal Government to immediately commence steps to recover all revenues lost to oil exploration and exploitation companies due to wrong profit sharing formula termed as the Production Sharing Contracts since August 2003.

The court then ordered the AGF to put mechanism in place within 90 days.

AGF engaged private company to recover revenue shortfall

Following the judgment, Malami engaged Trobell International Nigeria Limited for the purpose of recovering the lost revenue, which they subsequently calculated to be $62bn, including accrued interests for the 15 years period.

Trobell then issued separate letters to the five concerned international oil companies, demanding the payment of their share of the $62bn allegedly owed the Federal Government.

The companies were Shell Nigeria Exploration and Production Company Limited; Equinor Nigeria Energy Company Limited; Esso Exploration and Production Nigeria Limited; Esso Exploration and Production Nigeria Limited (Offshore East) and the CNOOC Exploration and Production Nigeria Limited.

For instance, Trobell, in a January 14, 2019 letter to Shell demanded the payment of a total of $13,651,034,052.59, translating to about N5trn.

The five companies, however, filed separate suits at the Lagos and Abuja divisions of the Federal High Court protesting the demand of the sum, which they alleged were unilaterally arrived at by the Federal Government and its agent.

They contended that arbitration proceedings were the appropriate forum to reconcile such disputes regarding the contract entered into by the two parties.

Findings by our correspondent showed that Shell, which instituted its own case in Abuja, earlier this year changed the Olaniwun Ajayi’s law firm as its counsel in the case and subsequently briefed Adewale Atake (SAN) to take over the case on its behalf.

Shell drops suit against FG in exchange for AGF’s withdrawal letter

Atake, who took over the case by virtue of the notice of change of counsel filed by Ogunmuyiwa Balogun of the Olaniwun Ajayi’s law firm on May 18, 2020, filed a notice to discontinue the case on the same date.

The court, presided over by Justice Ijeoma Ojukwu of the Federal High Court in Abuja, subsequently struck out the case in her ruling delivered on May 27, 2020.

But our correspondent’s findings showed that the decision by the company to withdraw the suit was informed by Malami’s letter dated March 13, 2020, which was filed alongside the firm’s reply as exhibits, attached to the notice of discontinuance filed by Atake.

Atake’s notice of discontinuance of the suit cited Malami’s March 13, 2020 letter with reference number HAGF/ARMU/RMTINL/2019 as the reason for withdrawing the suit.

The letter by Malami titled, ‘Demand for payment of additional revenue and interest accruing to the Federal Government of Nigeria pursuant to the Production Sharing Contracts’ was addressed to the Managing Director/Chief Executive Officer of Shell.

The letter referred to an October 3, 2019 ‘meeting of stakeholders’ which he said, held “with a view to resolving issues and arriving at amicable settlement and possible negotiation on terms of payment.”

Malami backtracks on request for payment

Informing the company of his decision to withdraw the previous demand for payment, Malami stated, “Please, be informed that the previous demand covered by letters issued by Messrs Trobell International Nigeria Limited seeking the payment of additional revenue and interest accruing to the Federal Government of Nigeria under the Production Sharing Contracts is hereby withdrawn.”

In what appears to be his decision to transfer his previous leading roles in the recovery efforts to the regulatory agencies, the minister added, “The regulatory ministries, departments and agencies (including but not limited to Federal Ministry of Petroleum Resources, Federal Inland Revenue Services, Nigerian National Petroleum Corporation, and Department of Petroleum Resources) will engage your company to remedy any possible lapses over the implementation of the Production Contracts in Nigeria.”

In the letter, Malami requested a termination of the ongoing litigation at the Federal High Court in Lagos and Abuja and withdrawal of the notices of arbitration arising from this demand in exchange for the withdrawal of the demand letter.

Malami’s letter of withdrawal of demand of payment has resolved dispute –Shell

However, the reply by Shell’s MD, Ojulari, indicated that the suggestion to the company to terminate its suit and withdraw its notice of arbitration proceedings against the Federal Government had been on the table for some time, but the firm did not bulge until it received Malami’s March 13, 2020 letter on May 6, 2020.

Taking the letter by Malami as a final resolution of the dispute over recovery of the outstanding revenue, the company did not indicate in its reply dated May 11, 2020, any interest to embrace the talks proposed by Malami.

Ojulari in his reply, with reference number SNEPCo LEG- 2020-001L, addressed to Malami, stated that the contractor it engaged to handle the dispute with the Federal Government had, on February 6, 2019, informed the NNPC of its intention to commence arbitration “should the dispute created by the Federal Government of Nigeria’s demand for alleged outstanding revenue from OML 118 not be amicably resolved.”

Ojulari stated that the contractor had only initiated the case at the Federal High Court to seek “interim measures of protection” pending the determination of the dispute “by an arbitral tribunal properly constituted pursuant to the terms of OML 118 Production Sharing Contract.”

He added that its contractor had to serve a notice of arbitration on the NNPC on January 10, 2019 when no amicable resolution in relation to the dispute was reached.

Indicating that the company only yielded to the request for the withdrawal of the Federal High Court suit and the arbitration notice because of Malami’s demand for the withdrawal of the demand for payment, Ojulari stated, “That dispute has now been resolved by the withdrawal of the FGN’s demand as effected by your letter referenced.

“In reliance on this withdrawal, the contractor will now proceed to withdraw/discontinue the above-mentioned arbitration proceedings and the proceedings that are currently before the FHC (Federal High Court).”

Meanwhile, despite his correspondence with the Shell MD, the AGF on July 28, 2020 listed the $62bn as part of assets expected to be recovered by the Federal Government.

In the document he read at the media briefing but originally presented at the Federal Executive Council, the minister stated on page 23 of the document that the anticipated $62bn oil revenue would be utilised for the Lagos-Ibadan expressway, Kano-Abuja expressway and the Second Niger-Bridge projects.

Malami reacts

When contacted on Friday to clarify why Malami withdrew the demand for the $62bn from the IOCs while continuing to raise the hope of the public about the prospect of recovering the money for the Federal Government, the media aide to the minister, Dr Umar Gwandu, stated in a terse message sent to our correspondent, “Please, send your inquiries on IOCs to the Ministry of Petroleum Resources or NNPC. Thank you.”

Gwandu had on July 29, 2020 in a statement clarifying the minister’s comment on the $62bn revenue shortfall, stated that the AGF “has identified and vigorously pursued the recovery of same (the $62bn) from the international oil companies” in the last one year.


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