Nigeria blocks Shell’s bank accounts over oil pipeline dispute
A Nigerian court restricted Royal Dutch Shell Plc’s access to its bank accounts in the West African country amid a legal dispute with a local oil producer over a pipeline deal six years ago.
Aiteo Eastern E&P Co. Ltd. is demanding billions of
dollars in damages, claiming Shell misrepresented the condition of the pipeline
and under-counted the volume of crude one of its facilities received from the
Nigerian firm, according to court documents seen by Bloomberg.
Shell said Aiteo’s lawsuit is baseless and it is working to
overturn the freezing order.
The dispute is just one among a growing list of legal
entanglements related to Shell’s business in Africa’s largest crude producer.
Since the start of the year, a Dutch court has ordered the company to pay
compensation for oil spills in two villages more than a decade ago, and the U.K.
Supreme Court allowed 40,000 fishermen and farmers to sue Shell in England.
The legal precedents could result in the company facing more
cases related to Nigeria in its home country.
A federal court in Lagos, Nigeria’s commercial hub, on Feb.
15 retained an injunction issued late last month directing Shell not to
withdraw funds held at 20 banks “without first preserving or ring-fencing”
almost $2.8 billion. The judge, Oluremi Oguntoyinbo, has adjourned proceedings
until Feb. 24.
Aiteo’s allegations relate to its $2.4 billion purchase in
2015 of a 45% interest in an oil block and pipeline from a trio of
multinational companies: Shell, Total SE and Eni SpA. Nigeria’s state-owned
energy company owns the rest.
The African company secured a loan of almost $1.5 billion
from local and international banks to fund its entrance into the oil
exploration and production business, according to a lawsuit the company filed
against four Shell units and the parent company on Jan. 15. Aiteo is controlled
by prominent Nigerian businessman Benedict Peters.
Aiteo alleged in the lawsuit that “fraudulent
misrepresentations” made by Shell’s local unit, the former operator of the
assets, before the sale mean it is “practically impossible” for the company to
“meet its repayment obligations to its financiers.” The company claims the
pipeline, the Nembe Creek Trunk Line, or NCTL, was in a more degraded state and
more prone to crude theft than Shell advertised.
Subsequent to the transaction, Aiteo also alleges that Shell
understated the volume of crude delivered to its Bonny oil and gas export
terminal through the NCTL by Aiteo and other local producers. The company is
demanding that Shell refund it with 16 million barrels of oil or $1.3 billion.
The full penalty sought in Aiteo’s lawsuit is for more than
$9 billion, including $5 billion in general damages, $799 million to cover the
purchase of the NCTL and $933 million to reimburse pipeline repairs.
Shell “is working to secure an expeditious discharge of the
freezing injunction which we believe was obtained by Aiteo without any valid
basis,” a spokesman for the company’s Nigerian unit, SPDC, said by email.
Aiteo’s allegation of “crude theft/diversion” related to the
Bonny terminal is “factually incorrect,” Shell said. Rather, it is a “distinct
issue” concerning a directive given by Nigeria’s Ministry of Petroleum
Resources to SPDC, as operator of the facility, saying that the company should
reallocate oil between producers that inject into another pipeline and those
that use the NCTL.
Shell plans to refund 2.1 million barrels from producers,
including SPDC and Total, that pump crude into the Trans Niger Pipeline to
firms that use the NCTL, according to a letter the company sent the petroleum
resources ministry on Feb. 8. The allotment to Aiteo will be 1 million barrels,
with the largest share taken from a joint venture headed by SPDC.
The readjustment, which relates to calculations made at the
Bonny terminal between June 2016 and June 2017, is part of “normal industry
practice,” Shell said.
Comments
Post a Comment