Monday, Mar 2021

Nigerian oil industry is about to witness some feisty legal fireworks as Aiteo E & P’s instituted litigation against Shell Petroleum Development Company (SPDC) for fleecing it crude oil running into over 16 million barrels, has received a massive boost after Justice Oluremi Oguntoyinbo of the Federal High Court in Lagos granted an order blocking twenty bank accounts belonging to SPDC.

Aiteo Eastern E&P Company Limited had headed to court after SPDC was found to have wilfully engaged in some underhand dealings which resulted in massive losses for the indigenous oil concern, thus making it difficult for it to meet its obligations to its financiers. Aiteo has dragged SPDC and four of its sister companies before a Federal High Court sitting in Lagos, over the alleged theft of what Aiteo said are over 16 million barrels of crude oil.

While giving the order in suit no FHC/L/CS/52/2021, the presiding judge held that she was making the order pending the hearing of the motion and determination of the motion on notice for interlocutory injunction filed before it by Aiteo.

Justice Oguntoyibo further restrained SPDC and other defendants, including Royal Dutch Shell, Shell Western and Trading Company Limited, Shell International Trading and Shipping Company Limited as well as Shell Nigeria Exploration and Production Company Limited from withdrawing funds standing to their credit without first “ring-fencing” them to the value of the 16,050,000 barrels of crude oil.

According to the court, on no account must any transaction be carried out in the listed accounts without first “ring-fencing any cash, bonds, deposits, all forms of negotiable instruments to the value of $2.7 billion and paying all standing credits to the Shell companies up to the value into an interest yielding account in the name of the chief registrar of the court, who is to hold the funds in trust” pending the hearing of the motion.

The court further noted that pending the hearing and determination of the motion on notice for interlocutory injunction, the named banks were restrained in the interim from accepting, honouring or giving effect to any mandate , cheque or instructions presented by the defendants.

The certified true copy was signed by the Registrar of the Court, Mrs. Oluwakemi Obalaja.

The court noted that the breakdown of the total sum comprises $799 million being the amount claimed to have been paid by the plaintiff to the five defendants for the acquisition of the Nembe Creek Trunk Line (NCTL) pipelines and the assets, and $389,631,877.76 allegedly lost by the plaintiff arising from the leakages in the NCTL and the degraded conditions of the NCTL.

Furthermore, it listed $578,951,901.99 a as having been lost by the plaintiff arising from the crude theft/larceny in the NCTL, and $933,000,000 claimed as having been expended for the repairs of the pipelines and acquisition of the equipment including well-heads, generators and pumps as well as replacing the flow lines within the NCTL.

Before adjourning the case to February 24, Justice Oguntoyibo stated that, “Pending the hearing and determination of the motion on notice for interlocutory injunction, the respondent banks are directed to sequestrate and/or ring-fence any cash, bonds, deposits, all forms of negotiable instruments or chose(s) in the action due to or standing to the credit sum/value of the amounts stated in prayer 1,2,2 and/or 4 above.”

In its statement of claim, Aiteo stated that the defendants, that is, SPDC and its sister companies had a deliberate corporate policy to unjustly enrich themselves at the expense of the plaintiff and other local oil companies. It affirmed that with the use of a wrong metering system, SPDC and the four other associated companies understated and retained crude oil volumes due to the company to the detriment of Aiteo.

Aiteo declared that the officials and agents of the defendants were aware of the wrongful appropriation of the plaintiff’s crude oil but did nothing to prevent or stop it until directives were issued by DPR.

The local oil company argued that the only means by which the defendants could conveniently appropriate the plaintiff’s crude oil illegally was to understate the crude oil volume belonging to it.

“The monetary benefits obtained by the defendants were also retained by the said defendants. The defendants continued to use the understated oil volumes and proceeds for their personal use. The defendants were unjustly enriched by the use of the unapproved meter and continue to unjustly enrich themselves.

Their actions were without any concern, consideration, and or regard for the detrimental effect same had and would have had on the plaintiff,” Aiteo said.

According to the indigenous oil company, SPDC and its co-travellers made use of the Coriolis meter in bad faith and was meant to deceive Aiteo regarding the amount of crude oil volumes due to it.

The company maintained that the Coriolis meter has poor zero stability which affects flow meter accuracy, cannot be used for fluids with lower density and sensitive to external vibration interference, among others, adding that it was also a matter of national security.

It claimed that the action by SPDC deprived Aiteo of refundable crude and has affected its business negatively, insisting that contrary to the figures by DPR, Aiteo experts have concluded that 16,050,000 barrels were stolen.

According to the company, it is entitled to the sum of $1,275,975,000, being the amount it would have sold the over 16 million barrels of crude oil at the rate of $79.50 per barrel being the prevailing price in July 2018.

Alternatively, it added that if DPR figures are used, then the 1,022,029 barrels would yield about $81.2 million, saying that because of the “fraudulent” action of the defendants, it became practically impossibile to meet its repayment obligations to its financiers, who provided it with the sum of $1,488,000,000 to acquire assets.

“The plaintiff further states that the fraudulent and or wrongful act by the defendants impacted negatively on both the production level and the revenue available to it for debt servicing and operation.

“Furthermore, the constant theft and larceny of the plaintiff’s crude by the 1st defendant and the intentional act to understate and deprive the plaintiff of its crude as observed by DPR negatively impacted on the plaintiff’s ability to properly service the loans and interests thereon,” Aiteo averred.
Some of the lawyers whose legal expertise has been enlisted by Aiteo include: Kemi Pinheiro, Mike Ozekhome, Yakubu Maikyau, Muiz Banire, Oladapo Olanipekun, Emeka Ozoani, all Senior Advocates of Nigeria (SAN).

Before Aiteo approached the court, DPR had ordered SPDC, a subsidiary of Royal Dutch Shell, to refund 2,081,678 barrels of crude oil understated between 2016 and 2018.

The DPR also sanctioned the International Oil Company (IOC) for the infraction, to which SPDC has already admitted to in another official letter to the DPR.

As part of the punishment for flouting the rules between June and July of the years under review, Shell was directed to pay a sum of N250,000 while it also agreed to a 10-month compensation plan to reimburse its Joint Venture (JV) partners, who were short-changed in the course of the infractions.

The DPR accused the company of cheating some of its JV indigenous oil concerns, including Aiteo, Belemaoil, Eroton and Newcross, through an unapproved metering system, which it used to misappropriate crude oil.

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