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$9bn Damages: The Same Fool and His Money

By Henry Boyo

THE corporate name “Process and Industrial Developments Limited” (P&ID) was until lately, probably, only known to very few Nigerians in Public Service, and the oil and gas subsector.

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However, despite the clearly parlous state of our economy, Nigerians may have to shell out about $9bn, almost 20 per cent of our current foreign reserves, to a British Virgin Island, registered company, which claims to have spent about $40million on a gas refining facility, before the Nigerian Government, unilaterally, reneged on a 20 year Gas Supply and Processing Agreement, which Nigeria endorsed in 2010.

Under the terms of that agreement, Nigeria would supply the ‘wet gas’ released from the oil drilling process to P&ID to refine, in a reportedly Greenfield facility, which will, ultimately, produce the “lean gas”, used to fire power stations as well as other domestic and industrial applications.

Notably, in 2010, when the late Dr. Rilwan Lukman, who was the Minister for Petroleum, signed the agreement, President Umaru Yar’Adua was on extended medical vacation to Saudi Arabia! The agreement demanded that, Nigeria would ensure daily supply of 150million standard cubic metres of ‘wet gas’ and build the necessary pipelines from the oil well licenses of OMLS 67 and 123, operated by Addax Petroleum, to P&ID’s proposed facility in Cross River State. Ultimately, P&ID failed to build the gas refinery, because according to them, the Nigerian government refused to build the pipeline for gas supply to the proposed site of the P&ID’s plant.

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Inexplicably, however, the Nigerian authorities seemed to have gone to sleep after this agreement, and therefore failed, even after three years, to build the required pipelines, while P&ID, presumably folded their hands and also waited!

Meanwhile, P&ID, also claimed to have, so far, invested upto $40million on the project, even though, there was no evidence that it had even acquired, talk less of building any facility at Adiabo in Odukpani Local Government Area of Cross River State! Notwithstanding, in March 2013, P&ID, initiated arbitration for restitution in London.

However, later in July 2015, an Adhoc Tribunal in London, approached by P&ID, concluded that Nigeria reneged in its agreement with the oil and gas company. Nonetheless, rather than accept the Tribunal’s terms of Arbitration, Nigeria’s lawyers proceeded to file a fresh action in Nigeria, where a Federal High Court, in Lagos, set aside the Liability Award of the London arbitration.

Notably, nonetheless, despite the Lagos Court’s judgement, Nigeria’s Lawyers continued to attend the proceedings in London to determine the extent of damages, even when these lawyers did not challenge the facts, and assumptions or, indeed, the basis of calculation of the bloated award. Ultimately, in January 2017, by a majority of 2-1, the London Tribunal awarded $6.6bn to P&ID as damages. The Nigerian, appointed arbitrator, Bayo Ojo (SAN), dissented the award and in his own opinion, estimated the Claimant’s loss at just about $250m over three years.

Subsequently, however, the Goodluck Jonathan Administration, reportedly reached a final settlement for $850m, but this payment was also not effected, before Jonathan handed over to Muhammed Buhari, who won the 2015 elections. Thereafter, the new Administration, decided against settlement and conversely, decided to set aside the clearly oppressive award to P&ID, especially since the initial $6.6bn award, had spiked with an additional $2.3bn interest to become $8.9bn.

Invariably, P&ID remained relentless in their demand, and ultimately filed a petition, in a US Court in March 2017, to equally endorse the award. There was, inexplicably, regrettably, no legal representation for Nigeria at that hearing!

However, in their focused pursuit of the award, P&ID similarly brought up proceedings in London, to enforce the tribunal’s judgement. Although, Nigeria had up to August 15, 2018 to file an acknowledgement of service, regrettably, Nigeria, unduly, delayed and ultimately filed the acknowledgement of service in October 2018, reportedly because, officials in Nigeria’s Ministry of Justice, apparently, internally, simply filed the notice of the award, without escalating this obviously terrorist onslaught on our paltry reserves and the welfare of all Nigerians, particularly, the 100 million Nigerians who currently live below the poverty line.

Notably, however, the relevant Justice Ministry officials, later became aware of the urgency of the matter, after the deadline for filing and acknowledgement of service had lapsed and after P&ID’s Solicitor, subsequently, sent a notice of the Court’s approval for enforcement to Nigeria’s lawyers.

Nevertheless, the English Court took a charitable disposition to the oppressive effect that the huge levy of $8.9bn would have on the economy and welfare of millions of Nigerians, and therefore indulged Nigeria to submit a belated counter argument, to overturn or reduce the enforcement proceedings. Consequently, the Court, granted Nigeria a fresh hearing for May 21, 2019. Sadly, ultimately, the Court upheld the judgement of the London Arbitration panel in August 2019.

In retrospect, the full performance of the agreement, between the Nigerian Government and P&ID, would have probably changed the landscape of the Nigerian oil and gas industry and also clearly impacted, positively, on the level of our foreign reserves, and level of employment.

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Notably, under the agreement, Nigeria would have received 85 per cent of the refined gas, “free of charge” (FOC), for power generation, to drive our heavy industries cost effectively and also provide more electricity and cooking gas for more Nigerians nationwide. Furthermore, according to the agreement, P&ID would retain the balance 15 per cent of the refined “free clean gas” and other process by-products, such as methane, propane and butane which would be exported to enhance Nigeria’s foreign reserves. Consequently, Nigeria would also benefit from its 10 per cent stake in P&ID!

Arguably, from the above, the significant economic and social benefits which Nigeria would have derived from the botched agreement with P&ID, makes a macabre mockery of the continuous extension of the indisputable devastation, caused by the horrid products of ceaseless gas flaring, which imposes severe health and economic challenges on indigenes in oil producing areas, who have clearly become disenfranchised and oppressed, even when they live in otherwise, well endowed oil producing communities, responsible for well over 60 per cent of government revenue.

The humongous and clearly destabilizing $8.9bn award, notwithstanding, it goes without saying that both Nigeria, as well as foreign attorneys would also be paid in tens of millions of dollars, as a mere one per cent fee on this matter, would easily earn about $90m or over N27bn for legal fees alone.

The terms of agreements and the subsequent default is symptomatic of the often reckless and insensitive approach to agreements endorsed by the Nigerian Government over the years. Indeed, last year, while commenting on the need for circumspection before Nigeria’s endorsement of AfCFTA, the Vice President, who is also a Professor of Law decried the quality of agreements signed by Nigerians officials, and wondered whether or not these officials had the nation’s interest at heart. Regrettably, Osinbajo has, inexplicably failed so far to review any of such unfavourably skewed agreements endorsed by Nigeria.

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