U.S Court’s Fine Nigeria $6.59 Billion Over Reneged Gas Contract
U.S Court’s Fine Nigeria $6.59 Billion Over Reneged Gas Contract.
The Ministry of Petroleum Resources, the Department of Petroleum Resources (DPR), and the Nigerian National Petroleum Corporation (NNPC), are yet to take a position after a United States court gave a $6.59 billion default decision against the Federal Government. The sanction was for the parties thwarting a gas deal involving British firm, Process & Industrial Development Limited (P&ID).
The gas processing and production agreement reached between Nigeria’s Petroleum Ministry and the P&ID was halted after the British company accused Nigeria of failing to keep its own end of the bargain.
Under the terms of the contractual agreement, P&ID was to construct an accelerated gas development project to be located in Cross Rivers State.
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The Federal Government was to source for natural gas from oil mining leases (OMLs) 123, and 67, operated by Addax Petroleum and supply to P&ID to refine into fuel suitable for power generation in the country. Initial volume was about 150 million standard cubic feet (mscf) of gas per day, and eventually ramped up to about 400mscf under a 20-year period.
P&ID had alleged that after signing the agreement, the government reneged on its obligation after it opened negotiation with the Cross River State Government for allocation of land for the project.
P&ID said the failure to construct the pipeline system to supply the gas frustrated the construction of the gas project, thereby depriving it the potential benefits expected from the 20 years’ worth of gas supplies.
But P&ID had said attempts to settle out-of-court with the federal government failed, which was why in August 2012, it served the Nigerian Government a Request for Arbitration.
Government on its part, argued before the Tribunal that: “The failure of P&ID to acquire the site and build Gas Processing Facilities was a fundamental breach, and that no gas could be delivered until this has been done.”
In July 2015, the Tribunal found that Nigeria had repudiated its obligations under the GSPA, and that P&ID had been entitled to accept the repudiation and claim damages for breach.
On December 23, 2015, the government asked for the award to be set aside. That was after earlier committing that the arbitration’s decision shall be final and binding upon parties.
On February 10, 2016, the application was dismissed, paving way for the hearing on July 22 to 24, 2016, to determine the damages. In the Tribunal’s opinion, the damage suffered by P&ID was the loss of net income the company would have received if government had kept its side of the contract.
Two members of the three-man Tribunal, Lord Hoffmann, and Anthony Evans, held that P&ID’s expenditure and income should have been about $6.597 billion if the contract was respected by the Nigerian Government.
The spokesperson for the Ministry of Petroleum Resources, Alibi Idang, did not comment on the issue. He said the Ministry’s head of legal affairs was also not available for comment.
The spokesperson for DPR, Paul Osu, also declined to comment. But a top source at the Department said the DPR was not consulted when the deal was struck, and therefore cannot take a position now, as the contract was reached by act of military fiat.