P&ID’s Quest For $9bn Nigeria’s Assets: Once Upon A Blessing!

The British High Court judgement against Nigeria on August 16, 2019, authorising seizure of the country’s assets worth $9 billion continues to rattle stakeholders because of the impact

As the fallout of the judgment of a United Kingdom court granting Process and Industrial Development Limited (P&ID) the authority to seize Nigeria’s assets worth $9 billion over a failed gas deal continue to generate interest in the public circle, the ordinary Nigerian has been left to wonder whether the oil and gas sector is a curse or a blessing to the country.

This is more so when the narrative by P&ID that the aborted contract that is now threatening to consume one fifth of the nation’s $49 billion foreign reserve was designed to generate 2,000 megawatts of electricity in a country with almost half of its population living in darkness in the 21st century.

According to a report, P&ID’s lawyer, Barrister, Andrew Stafford, was quoted to have said, “Nigeria failed to live up to its contractual commitments. The project would have generated 2,000 MW of power for the national grid and could have been transformative for millions of Nigerians. At present, the World Bank estimates that in 2017, only 59 per cent of the country had access to a reliable supply of electricity.”

On his part, the governor of Nigeria’s Central Bank (CBN), Godwin Emefiele, acknowledged the economic implications of the judgement which the P&ID team has expressed the commitment to vigorously enforce when he said, “We know that the implication of that judgment has some impact on monetary policy and that is why the CBN is going to step forward and strongly defend the country and the reserves of the federal republic of Nigeria.”

Government’s Initial Reaction to Judgement

Perhaps it was not only the citizens that were shocked by threatening posture of the London judgement, the government equally felt it too. To this end, while the nation awaits President Muhammadu Buhari’s inauguration of his cabinet, the Permanent Secretary, Ministry of Justice, Dayo Apata, dismissed the ruling as completely wrong and obviously unjustifiable.

Apata, in a statement said, “As regards the recent Judgment of the English Court of 16 August 2019, the federal government’s counsel has been instructed to pursue an appeal on the judgment of the English Court dated 16 August, 2019 and at the same time seek for a Stay of Execution of the said judgment.

“In view of the above, please be informed that the federal government of Nigeria is making vigorous efforts to defend its interest in this matter and would not relent in exploring every viable option in doing so.”

How and When it Started

Government’s Account

Explaining what led to the judgement, Apata in his statement said the dispute that led to Arbitration between Federal Government of Nigeria (FGN) and P&ID arose from a 20 year Gas Supply and Processing Agreement (GSPA) entered in 2010 between FGN (through the Ministry of Petroleum Resources) and the company in respect of an accelerated gas development project in Nigeria’s OMLs 67 and 123.

He stated that P&ID never began the construction of the project facility although it alleges it incurred about $40million in preliminary expenses.

According to him, P&ID’s claim in the arbitration proceedings was mainly for loss of profit for the entire twenty-year term of the GSPA, initially claiming the sum of $1.9 billion and later increasing its claim to $5.9 billion.

The Arbitral Tribunal on January 31,2017, rendered its final award against the ministry of petroleum resources in the sum of $6.597 billion together with pre-award interest at the rate of 7 per cent per annum effective from March 20, 2013, and post-award interest at the same rate till date of payment.

He added that upon the award, P&ID commenced recognition and enforcement proceedings of the arbitration award against FGN in March 2018, in both the United Kingdom and the United States of America.

The federal government, Apata said was duly represented in the proceedings in the United States by the law firm of Curtis, Mallet-Prevost, Colt & Mosle LLP which also represented it in the UK  proceedings of which judgement was given on August 16, 2019 in favour of the P&ID to commence enforcement proceedings against the FGN assets in the UK.

 P&ID’s Account

In his own narratives, Brendan Cahill, founder of P&ID, said he and his late business partner, Michael Quinn, signed a contract with Nigerian ministry officials in 2010. The federal government, he said, agreed that it would install pipelines and supply the gas that would connect to P&ID’s “state-of-the-art gas processing plants” in Calabar, Cross River, to be built free of charge to the state.

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The intention was to convert wet natural gas to dry gas to power the country’s national electric grid, improving supply. P&ID would sell 15 per cent of the propane, ethane and butane by-products on the international market, with an expectation of generating $5billion to $6billion in profit over a 20-year period. In return, Nigeria would receive 85 per cent of the gas at no cost for generating electricity.

But in 2012, however, the deal fell through after as P&ID alleged that the Nigerian government failed to install pipelines or supply the gas. This even as the government, argued that the company did not build the promised processing plants, while P&ID claimed it was the government’s conduct that prevented them from fulfilling their side of the agreement.

In a statement to the tribunal, Cahill explained that he had conceived the idea of processing gas from the Calabar region in 2006, after which P&ID set about the necessary preparatory engineering work. He alleged that over two years, the company invested more than $40million on feasibility studies, licences, drawings and project management costs, before approaching the Nigerians.

He stated that after several years of negotiations, the parties signed the contract in 2010, during the presidency of Umaru Yar’adua. Cahill alleged that the government failed to provide the necessary technical specifications for him to meet his contract and the parties fell into dispute after he discovered the government was engaging with a third party to process the gas.

During the 2015 tribunal, the Nigerian government argued that P&ID’s failure to build the gas processing plant was a fundamental breach of contract, as no gas could be delivered until this was done. The tribunal dismissed their arguments, finding them in breach of contract.

In January 2017, P&ID were awarded $6.6billion and claimed interest at the rate of $1.2million a day, which increased their claim to more than $9billion.

At the commercial court on August 16, P&ID sought to convert the tribunal’s award to a high court judgment. The Nigerian government contested the hearing, arguing that as the original contract had been signed in Nigeria, an English court had no jurisdiction, describing the tribunal’s award as manifestly excessive. However, Justice Christopher Butcher ruled in favour of P&ID, enforcing the $9billion award.

 Political Intrigues

In what looks like a political blame game, President Muhammadu Buhari was reported last week to have directed the Economic and Financial Crimes Commission, the National Intelligence Agency and the Inspector General of Police to conduct a thorough investigation into the case.

The Minister of Information and Culture, Lai Mohammed, who disclosed this at a press conference in Abuja said the decision was based on suspicion of foul play in the contract negotiations.

“We want to place on record that the federal government’s views with serious concern the underhanded manner in which the contract was negotiated and signed.

“Indications are that the whole process was carried out by some vested interests in the past administration, which apparently colluded with their local and international conspirators to inflict grave economic injury on Nigeria and its people.

“In view of the above, and in an attempt to unravel the circumstances surrounding the entire transaction, the Attorney General of the Federation, with the approval of Mr President, has requested the Economic and Financial Crimes Commission, the National Intelligence Agency  and the Inspector General of Police to conduct a thorough investigation into the company, the circumstances surrounding the agreement and the subsequent event, which includes commencing a full-scale criminal investigation.”

Mohammed was joined at the press conference by the Attorney General of the Federation, Abubakar Malami;  Minister of Finance, Budget and National Planning, Zainab Ahmed; and the governor of the Central Bank of Nigeria, Godwin Emefiele.

Responding to the government’s pronouncement  which was perceived in some quarters to be targeted at former president, Goodluck Jonathan, some members of his camp immediately fired back claiming that the process would fail.

The former presidential aide, Reno Omokri, in a statement stated that the move would backfire.

According to Omokri, part of the filings regarding the case read, “P&ID submits that it entered a gas supply and processing agreement with Nigeria’s Ministry of Petroleum Resources in January 2010. Pursuant to the agreement, P&ID claims that it would build the necessary facilities and then refine natural gas into non associated natural gas for a period of 20 years.”

He said:  “This transaction occurred in January of 2010. Former President Jonathan was not President in January 2010. During that time, he was completely shut out of power by an unelected cabal that ran Nigeria during the period of the ill health of the late President Yar’adua, before the national assembly courageously intervened on February 9, 2010.

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“That cabal not only fought against the ascension of then Vice President Jonathan to the office of acting President, but went beyond that to take documents, including budgets and contracts to Saudi Arabia, and claimed that the then ailing President Umaru Musa Yar’adua had signed them.

“Nigerians may recall that the cabal announced on December 28, 2009, that the ailing President Yar’adua had signed a supplementary budget and other documents from his sick bed in Saudi Arabia, without the foreknowledge or acquiescence of then Vice President Jonathan or the Executive Council of the Federation.

“In fact, a week later, the Conference of Nigerian Political Parties (CNPP) came out with an exposé alleging that the signatures on the documents were forged and Femi Falana (SAN) took up the case in court.

“The man who packaged and arranged the signing of the contract with P & ID was a member of the cabal and Yar’adua’s minister for petroleum, the late Rilwanu Lukman.

“Mr. Lukman and other members of the cabal treated then Vice President Jonathan with disdain and kept him in the dark about their actions because he had no executive authority, as the then President was unable to hand over to him as constitutionally stipulated due to the suddenness of his ill health.

“That same cabal has resurrected and has now coalesced around President Muhammadu Buhari, with some of them being made either ministers, or formal and informal advisers. As a matter of fact, the main man behind that cabal is now one of the closest persons to President Buhari.

“Nigerians may want to note that while this controversial contract was signed in January of 2010, former President Jonathan only became acting President on February 9, 2010.

“So, if the Buhari administration is looking for someone to blame for this judgment against Nigeria, it should look at its own cabal.”

However while the blame and accusation trading exercise continues, there are reports that the security agencies have commenced work as suspected key players in the transaction are said to be invited for interrogations.

 Experts Views

Reacting to the judgement, the executive chairman of the African Energy Chamber and CEO of the Centurion Law Group, Nj Ayuk, noted that the whole situation concerning the case was extremely puzzling. “Afterall P&ID, a company created specifically for this project, is claiming it is entitled to the full amount of what it would have gained over a period of 20 years of work, even though that period would not be over for another decade and some. Further, it is already charging interests on capital it would, if the project went forward, it would still be a decade away from generating,” he said.

He added that, “On top of that, it has chosen to pursue the matter in a British court, and has a separate law suite in an American court, when the contract was signed in Nigeria, under Nigerian law, and should be pursued in a Nigerian court, as the Nigerian legal team has repeatedly stated.”

Wondering how the court arrived at the judgement, he said, “P&ID has never even broken ground on the construction of this power plant, which it claims would have benefitted so many thousands of Nigerians. The company has reportedly spent $40 million on preparatory work, although it is impossible to attest what that work has been.

“Even just looking to the amount spent, work done and compensation sought, the figures seem simply absurd. $9 billion corresponds to 20 per cent of Nigeria’s foreign exchange reserves, it would be unthinkable that a nation state would pay that much capital to a small unknown enterprise that invested not but a small fraction of that amount in the country and done none of the contracted work. Further, it is perplexing that a British court would even consider such a decision.”

Ayuk, however, noted that the issue represents an important cautionary tale for African governments everywhere. “Very few things matter more in the struggle to attract investment and build a favourable business environment that will push the economy forward than the absolute sanctity of the contracts signed,” he warned.

“Investors need to know that their investments are safe and that they will be protected by the law in case the other parties falter on their obligations, as it seems to have happened with the Nigerian government,” he added.

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He noted that the Nigerian case was not the first of its kind. “Just in March, an international court ordered the Democratic Republic of Congo to pay South African DIG Oil Ltd $617 million for failing to honour two oil contracts.”

He described the incident as an unacceptable and unjustifiable loss of capital for the people of the DRC. Particularly taking into account that the loss was incurred because the country’s leaders failed to comply with a contract that could have brought a considerable amount of wealth for the country for many years to come, in both royalties and taxes, as well as help develop its oil industry.

According to Ayuk, Senegal’s government under President Macky Sall, was very smart to avoid this kind of litigation when it was confronted with the issue of the Timis Corporation and its ownership of acreage that included the Tortue field, which is estimated to contain more than 15 tcf of discovered gas resources.

“If President Macky Sall would have proceeded with terminating a valid contract for the acreage, the Timis Corporation would have engaged in arbitration and would have probably gotten a favourable judgment against Senegal. In the process, the gas fields would have sat dormant and produced no returns for Senegal and its citizens. “Sometimes leaders are confronted with tough choices and it takes a profile in courage to find solutions and still respect the sanctity of contracts,” he noted.

Emphasizing the wisdom in keeping to contract terms, he stated that even with criticism from civil society groups, Equatorial Guinea honoured contracts with U.S. oil companies that many oil analysts believe are unfavourable to the state.

“This principle has kept Equatorial Guinea’s oil industry stable and US firms continue to invest in new projects like the EGLNG backfilling project with Noble, Atlas Oranto, Glencore Marathon and the state,” he said.

He however added that, “African leaders and African nations can not afford this sort of mistakes anymore. If on the one hand, contracts must be respected, protected and followed through, the people in charge of evaluating and signing those contracts must have the project’s feasibility as the dominant reasoning behind any decision.

“What is the purpose of signing contracts for fantastic projects where there is neither the capital nor the conditions to pull it through,” he stressed.

On his part, legal practitioner, Mike Ozekhome, charged the government to exercise caution in complying with the order of a British court.

He stated that forfeiting such huge amount in assets could cripple Nigeria’s economy.

Ozekhome, who gave the warning in a statement on Wednesday in Abuja, said the only option left for the government was to appeal the judgement and ask the court for a stay of execution to avoid the dire consequences.

“Recently, a British court ordered the seizure of Nigeria’s foreign assets to satisfy a judgement debt. This sum is surely over N3.2trillion.

“This is an order, which, if carried out, will simply cripple Nigeria, whose entire 2019 budget for the whole country is N8.92trillion only.

“The best option thus open to the government to halt the looming disaster of attaching her foreign assets to the tune of $9billion is to immediately appeal the judgement and ask the court for a stay of execution.”

Ozekhome called on the government to hire experienced lawyers in the United Kingdom to stem the impending disaster that would eclipse the country.

He said, “It is a matter of cold law and facts. Let the government hire experienced legal hands in the UK immediately to stem this impending disaster that will eclipse all of us, without exception.”

While the government and people of Nigeria are pondering on how to overcome the challenges posed by the UK court judgement, it is obvious that the agencies of government saddled with the responsibility of acting on behalf of the court must do so in the interest of the society. Where necessary appropriate consultations involving competent experts should be sought.

In addition, proactive decision making is equally very vital here. Where it is necessary to negotiate it should be done in time. As it is today, Nigeria would continue to spend the much desired foreign reserves to pursue the P&ID case whether she agrees to settle out of court now or proceed with the case in a higher court. This definitely negates the initial purpose of entering into the contract.

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