Two international oil companies (IOCs), Chevron and Statoil, are currently battling the Nigerian National Petroleum Corporation (NNPC) in United States of America’s court to force the latter to pay out $1 billion in alleged overpayments on OML 128 where the prolific Agbami field is located.
Statoil and Chevron’s Nigerian branches had in mid-March, this year, requested a federal court in New York to uphold an arbitral decision ruled in their favour in March 2015 over their dispute with NNPC.
At the time, an arbitral court based in Nigeria had asked NNPC to pay nearly $1 billion to the majors to cover the excess amount it had earned when redistributing revenue from OML 128, which encloses the giant Agbami field (240,000 bpd), Africa Energy Intelligence reported.
It added that the NNPC motioned an appeal to the Federal High Court in Lagos which issued a counter-ruling in May 2015 stating that Statoil had to pay $1.1 billion to NNPC.
According to Africa Energy Intelligence, Statoil and Chevron didn’t accept the verdict and proceeded to take the battle to the New York court where they are claiming for NNPC to promptly pay the same amount as the March 2015 sentence, namely $1 billion.
The majors are represented by the law firm, Freshfields Bruckhaus Deringer, but also have the support of Nigerian lawyers, Babatunde Fagbohunlu, a partner at Aluko & Oyebode currently defending Chinese group, China National Offshore Oil Corporation (CNOOC) against Abuja, and Olasupo Shashore, former public prosecutor in Lagos, it added.
Efforts to speak with the parties in dispute proved abortive as none of them was willing to comment on it pending the adjudication on the suit.
In 2012, a Federal High Court in Abuja had voided two separate arbitration awards worth $5.25 billion (about N840 billion) against the NNPC in favour of some oil exploration companies in the country.
In the first case, the court voided the arbitration award of $3.45 billion and $1.8 billion award in the second suit.
Trial judge, Justice Adamu Bello, in the two judgments that lasted over three hours, held that the subject matter of the arbitration, the interpretation, application and administration of the Petroleum Profit Tax Act and the Deep Offshore Act, Education Tax Act and Company Income Tax Act were functions solely to be carried out by Federal Inland Revenue Service (FIRS), and not the oil companies as they had done and had wanted to continue doing.
FIRS had filed the action to impeach the arbitral proceedings initiated against NNPC by oil majors in the country outside the country, on the grounds that the tax issues raised in the arbitration proceedings were not resolvable by arbitration.
Shell, Esso, Nigerian Agip, Total Exploration had, following a dispute over production sharing contract entered into on April 19, 1993, over Oil Mining Lease (OML) 118, in Bonga oil field, dragged NNPC before an arbitration panel which sat in South Africa and another European country and awarded costs against Nigeria.
Even before the arbitration panels entered their judgments, FIRS was in court contending that the issues raised by the oil companies in the arbitration panels concerned taxation, which reference had been made to the arbitration and was not one which was allowed by law to be settled by arbitration.
However, the award of $3.45 billion in the Shell-led arbitration claim was on the verge of being made in South Africa before the judgment was delivered.
The award of $1.85 billion against NNPC was made in favour of the ESSO/Mobil-led arbitration claim during the pendency of the case but has been rendered illegal by the judgment.
Meanwhile, the Group Managing Director of NNPC, Dr. Maikanti Baru, has said that the corporation was committed to supporting local investors towards growing the engineering profession, even as he noted that this would, in turn, ensure technological advancement of the nation’s oil and gas industry.
Dr. Baru disclosed this while speaking at the induction ceremony of the Group Managing Director of ARCO Group, Engr. Alfred Irabor Okoigun, with the Honorary Fellowship of the Nigerian Academy of Engineering (NAE), in Lagos, weekend.