Gas Deal: The doom-laden $9bn pejorative London judgment

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In William Shakespeare’s hilarious love play: A Midsummer Night’s Dream in Act 3 Scene 2, fictional character  Hermia was described as  “Though she is little, she is fierce!” One may not go into details of the characterization of Hermia who might be small in size or metaphorically weaker or smaller, but she is strong and fierce. This may essentially be about a tiny company, against a goliath of the oil industry. Process & Industrial Developments Ltd., P&ID won a London court ruling that may force Nigeria, to pay it about US$9 billion, about 20 per cent of Nigeria’s foreign reserve. On Friday last week, a London Commercial Court presided over by Justice Christopher Butcher, gave a ruling to convert an arbitration award to a legal judgment that would allow P&ID make applications to seize Nigerian international commercial assets. The country’s solicitor general Dayo Apata in response said that the Nigerian government would appeal the decision.

IOC, Natural Gas

The case was a January 11, 2010 Gas Supply and Processing Agreement; GSPA made between the Process and Industrial Development Limited and Nigeria’s Ministry of Petroleum Resources. P&ID allegedly conceived the project that would have generated up to 2000 megawatts of power to millions of Nigerians. But were we able to ascertain the capacity and core competencies of P&ID in handling project of that magnitude? The Process & Industrial Developments Ltd is a closely held company founded by two Irish businessmen Michael Quinn and Brendan Cahill and registered in the British Virgin Islands. The British Virgin Islands is a British Overseas Territory in the Caribbean with a population of 35,800.  Under the 20-year agreement with Nigeria, P&ID was to build a gas processing plant to refine natural gas (wet gas) into lean gas (dry gas). Wet gas is gas that emerges from the oil-drilling process. In Nigeria, it is often flared off, rather than processed. It would have been turned into the kind of gas that could supply a power station, free of charge, to generate electricity into the national power grid. The Government’s obligation was to make available 400 million standard cubic feet per day, MMSCFD Wet Gas at the P&ID Calabar site boundary.

After the signing of the GSPA, P&ID required from the Government information critical to the construction of the gas processing facility which P&ID would be building in Calabar to strip the Wet Gas. The make-up of the Wet Gas (which was also relevant to the Government’s contractual obligations to supply Wet Gas with a minimum propane and butane content) and the pressure at which it would be delivered into the gas pipeline which would transport it to Calabar. It claimed the Governor of Cross River State approved and granted P&ID the allocation of Parcels 1 & 2 of the Energy City (Industrial) at Adiabo in Odukpani Local Government Area, covering an area of about 50,662 hectares of land, for the industrial use of P&ID. And that Addax Petroleum confirmed to the DPR its readiness to supply to P&ID the Wet Gas that it was at that time flaring in OML 123 for Phase 1, of the Project as set out in the GSPA. P&ID allegedly asked the then Group Managing Director of NNPC to authorise NAPIMS to oversee and conclude the necessary arrangements between P&ID and Addax, for the engineering logistics of delivery of the Wet Gas for Phase 1 from Addax, to enable work to proceed on the gas processing facility. P&ID allegedly claimed the Federal Government did not fulfil its contractual obligations.

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The period this agreement was entered (January 11, 2010) was one of the dark periods of our democracy when President Umaru Musa Yar’adua was terminally ill. He went to Saudi Arabia in November 2009 for medical treatment, returned to Nigeria on 24 February 2010, and died on 5 May. An exclusive group of people (cabal) in ailing Yar’adua government held sway and allegedly sidelined then Vice President Goodluck Jonathan from activities of the government. With utter chaos, one was not surprised that a prolonged bitter feud prevented relevant agencies including the NNPC to distil the proposed project. An Ad hoc Arbitration commenced on 22 August 22,2012 before a tribunal in London.  In July 2015, it concluded that Nigeria was liable, having repudiated the agreement with P&ID. The award, notwithstanding an out-of-arbitration agreement for the payment of US$850 million (about 9.6 per cent of the US$8.9 billion awards), was allegedly reached with P&ID during the President Goodluck Jonathan’s government. After losing the elections in 2015 the responsibility for the disbursement of funds to P&ID was allegedly passed on to the then-incoming administration of President Muhammadu Buhari. It is still not clear how the government opted to set aside the settlement agreement.

Subsequently, the Final Award on 31 January 2017 was signed and issued by a majority of 2-1 (the Nigerian-appointed arbitrator dissenting). It ordered the Nigerian government to pay P&ID US$6.6 billion in damages, calculated based on what the company was estimated to have earned over the course of the 20-year agreement, plus interest that is accruing daily at a rate of over US$1.2 million and now stands at US$2.8 billion.  Haven mismanaged the unfortunate situation is there any little window of grace to leverage on for amicable resolution with P&ID? Who are those involved? The government must take decisive action!



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