How Aiteo files a $2.5 Billion Lawsuit Against Shell Over The Sale Of OML 29
……..Fraud, deception, and misrepresentation are alleged.
…….As DPR awards Kugbo West Marginal Field in OML 29 to 7 Waves Petroleum, he seeks compensation.
Iexclusivenew Nigeria reports that in business, fortune and fraud are often unbalanced cardinal components; one refers to value, while the other speaks to a vice. Shell Petroleum Development Company (SPDC) has once again walked into the eye of the storm in its pursuit of these discordant variables.
In 2014, it sold the OML 29 to Aiteo Eastern Exploration and Production Company Limited, committing the heinous crime of industry fraud.
The SPDC exemplified the paradox of a business culture that cultivates authenticity while also displaying deception. Inquire of Aiteo.
Shell has been sued by the latter for claimed “fraud, deception, and misrepresentation” in the deal.
Aiteo is claiming that the defendant breached a fundamental term of the agreement for assignment dated October 17, 2014, as set out in schedule 1 part 3 – wells, in relation to the Kugbo West and Okiori oil wells listed in schedule 1 of the agreement for assignment, in a suit filed before a Federal High Court in Abuja by its lawyer, Kemi Pinheiro (SAN).
Despite receiving full payment for the deal, it accuses SPDC of neglecting to adequately disclose the true nature of the oil wells to it at the time of the sale.
Shell Petroleum’s actions were bound to result in a lawsuit. Aiteo is demanding over $2 billion in general and other collateral damages from Shell as a result of the alleged lies and deception at the time of the sale, describing the oil giant’s behaviour as “fraudulent misrepresentation.”
Immediately, trouble raised its ugly head. Aiteo learned that the SPDC, from which it purchased the OML 29 in 2014, had transferred the Kugbo West and Okiori Marginal Fields to the Department of Petroleum Resources (DPR) without disclosing this during the acquisition talks.
The flames of discord between the parties flared and burned brightly in the aftermath of a letter from 7 Waves Petroleum Limited, dated September 16, 2021, and titled, ‘2020 Marginal Field Bid Round Award Of Kugbo West Marginal Field Located In OML 29 to 7 Waves Petroleum Limited,’ informing Aiteo that a section of the controversial OML 29 now belongs to 7 Waves, courtesy of the 2020 Oil Bid Round conditions’ (DPR).
7 Waves Petroleum Limited’s Managing Director, Daniel Alabi, signed a statement that claimed in part:
“7 Waves Petroleum Limited actively participated in the 2020 Marginal field bid round conducted by the Department of Petroleum Resources [DPR] and emerged as the awardee with 100 percent equity interest in Kugbo West Marginal Field in OML 29 upon payment of the statutory signature bonus. The field would be jointly operated with our partner ‘Multiplan Nigeria Ltd’.
“Our firm would be glad to discuss and engage with Aiteo Eastern Exploration and Production Company Limited being the leaseholder for OML 29 with the underlying objective of executing the required Farmout Agreement thus (to) enable our firm commence field development activities essential to meet the timeline set by the DPR.
“We would be glad to set up an introductory meeting to discuss the next steps, kindly notify our firm of a suitable date and time. Thank you for the assistance, we look forward to a mutually beneficial and long-lasting working relationship.”
Aiteo had been given a harsh awakening when DPR informed it of the new development in a letter dated August 3, 2021, written by Edu Inyang, Director/CEO, DPR.
The SPDC possessed a 30 percent undivided participating stake in OML 29, which was part of the defendant’s undivided percentage interest in OML 29, which included TEPING, NAOC, and NNPC, among others.
Shell, as the operator of OML 29, published an Information Memorandum in October 2013 inviting bids for the acquisition of their joint undivided 45 percent participating interest in OML 29. Prior to the assignment of the lease to Aiteo, Shell, as the operator of OML 29, published an Information Memorandum in October 2013 inviting bids from interested entities for the acquisition of their joint undivided 45 percent participating interest in OML 29.
Aiteo claimed it did not only join others to bid for OML 29 but emerged successfully.
“As consideration for the agreement, the plaintiff made the following respective payments of; $220,000,000.00 as deposit pending the negotiation, completion, and execution of the transaction documents and relevant agreements and the balance of 2,130,000,000.00 upon the execution of the transaction and acquisition documents and the agreement,” it stated.
The plaintiff also claimed that, pursuant to an agreement for assignment dated October 17, 2014, the defendant, in collaboration with TEPING and NOAC as assignors, transferred to it their entire participating interest in OML 29, including all rights, interests, and obligations thereto, as well as their participating interest in the wells, “when they knew or ought to have known that they had surrendered and given the wells to the NNPC/ the federal government about five years earlier for valuable consideration”.
While Aiteo claimed that its bid for OML 29 was based entirely on the representations made in the electronic data room information, IM, and the Agreement, particularly as they pertain to the wells contained within OML 29, it acknowledged that issues arose in 2020 when it wanted to begin work on the assigned wells.
Aiteo claimed that
“In the circumstances, therefore, the plaintiff avers that the representations made by the defendant as aforesaid were made falsely, deceitfully and fraudulently with the intention of depriving the plaintiff the full benefit of the assets and the undivided 45 percent participating interest in the wells.”
As a result of the SPDC’s deception, Aiteo claimed that its expectations for the wells can no longer be met, and that its financial position has been seriously and negatively harmed, as it is unable to fully repay its alleged indebtedness to its financiers as a result of the SPDC’s improper activities.
While claiming to have paid $46.2 million for the wells, the plaintiff claimed that if the money had been invested in other business operations at a rate of 9.9% each year from 2014 to the start of the complaint, it would have returned an extra $52 million. As a result, Plaintiff asserted that it is entitled to a $99 million return.
Aiteo is also asking the Federal High Court to require Shell Petroleum to repay it $46.2 million in payment related to the Kugbo West and Okiori oil wells, money it had and received for a totally failed consideration.
Aiteo is also seeking $52 million in interest on the two wells’ payments. It is seeking $2.1 billion in general damages as well as $500,000 in general damages from the sales of 32,000,000 barrels of crude oil and other petroleum products from the Kugbo West well and 41,000,000 barrels of crude oil and other petroleum products from the Okiori wells.
The SPDC was dealt a major legal setback earlier this year when a Dutch court ordered it to compensate two Nigerian farmers for damages caused by oil leaks in 2004 and 2005.
Its alleged bullying tactics and exploitation of legal technicalities in the production and evacuation of crude oil to allegedly shortchange not only the Federal Government but also local oil and gas operators were nipped in the bud in court.
The SPDC was also embroiled in a missing crude oil controversy involving the local regulator, the Department of Petroleum Resources (DPR), which allegedly used an unauthorized metering system to steal crude and defraud local companies.