The Federal High Court has permitted the Shell Petroleum Development Company of Nigeria Limited and Global Gas and Refining Limited to explore an out-of-court settlement regarding the latter’s allegation that Shell failed to supply wet gas in accordance with the terms of a Gas Processing Agreement dated March 15, 2002.

Justice Inyang Ekwo approved the parties’ move to settle on Monday, September 23, 2024, in the suit filed by Global Gas’s legal team.

The applicant seeks an order restraining the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) from “approving, authorizing, consenting to, or otherwise granting permission for the ($1.3 billion) sale/divestment of the assets of the (SPDC) 1st Respondent” to Renaissance Consortium.

Claims and Counterclaims 

The Executive Chairman of Global Gas, Mr. Ken Yellowe, had stated before the court that his company instituted arbitral proceedings against Shell, alleging that it failed to supply wet gas in line with the terms of the Gas Processing Agreement dated March 15, 2002.

Yellowe, through his lawyer, Patrick Ikweato (SAN), stated that unless the court grants an order temporarily safeguarding the “assets” in dispute from being sold, its 2002 business deal with Shell may be jeopardized.

The applicant further submitted that the dispute is already before the Supreme Court of Nigeria, but the NUPRC is not a party at that apex court, hence the need for the trial court to restrain the statutory agency of the Federal Government of Nigeria.

“In the event of such a scenario, the Applicant will be without any remedy for settling the subsisting dispute over the manifest breach/violation of the 1st Respondent’s obligations to supply Rich Gas to the Applicant as agreed in the GPA dated March 15, 2002.

The instant application for the grant of an Interim Measure of Protection merely seeks to preserve the Applicant’s rights against the intended divestment/sale of SPDC’s onshore facilities as publicly announced by its parent company, Shell PLC,” Yellowe stated in an affidavit.

In the applicant’s further affidavit, Celestine Ezeokeke stated that he was aware that while the suit is pending before the court, “the NUPRC publicly announced/advertised that it has begun due diligence for the divestment of the Shell Petroleum Development Company (SPDC) assets, totaling crude oil and condensates of 6.73 billion barrels reserve, to Renaissance African Energy Company Limited (Renaissance).”

SPDC’s legal team, in a counter-affidavit , maintained that it “did not sell its onshore assets and facilities in Nigeria to anyone.”

The submissions by SPDC’s legal team before the Federal High Court in Abuja came about six months after its parent company, Shell Plc, announced it had reached an agreement to sell its Nigerian onshore oil assets to the local consortium for over $1.3 billion, pending government approval.

However, in its counter-affidavit, SPDC’s Legal Counsel, Global Litigation (Sub-Saharan Africa), Mr. Kingsley Osuh, informed the court that the dispute between his company and Global Gas is already before the Supreme Court for final determination.

He added that the transaction with Renaissance was not an asset sale but a share sale transaction whereby the SPDC’s shareholder agreed to sell its shares in the SPDC to a company called Renaissance.

“The share sale transaction did not and will not affect the 1st Respondent’s 30% participating interest in eighteen (18) Oil Mining Leases (“OML”) that are currently part of the 1st Respondent’s Joint Venture, with the 1st Respondent as Operator of the unincorporated Joint Venture with the Nigerian National Petroleum Company Limited, Total Energies EP Nigeria Limited, and Nigerian Agip Oil Company,” Shell stated.

He added that the applicant’s claims are for liquidated sums, that is, a compensation figure for an alleged breach of contract, stating that if its claim is upheld by the courts, the SPDC, as a corporate entity, is capable of paying the compensation to the applicant.

What Transpired in Court

At the resumed sitting on Monday, Justice Ekwo said that at the last proceedings, the applicant’s lawyer, Ikweato, applied to the court to allow the parties to explore an out-of-court settlement.

Ikweato responded that he had written to Shell several times regarding that settlement and eventually received a letter from Shell last Friday.

Last Friday, we got a letter from the first respondent (Shell). My Lord, the interesting thing is that despite all that we said in that letter, the first respondent has now agreed to present the proposal for the settlement to the Joint Venture Partners.

“So in that spirit, I pray that your Lordship will give us another date to see what comes out,” he said while drawing the court’s attention to other pending applications in the matter.

Chukwuka Ikwuaso SAN, counsel for Shell, confirmed that his client did send a letter to the plaintiff’s counsel.

He suggested that the matter be adjourned for a report on settlement or hearing.

So that if by the next time we come, the parties have not settled, we can proceed with the hearing,” he added.

Ekwo stated that he wants to allow the parties to explore out-of-court settlement if they wish.

“I don’t want to interfere in the parties’ settling. I will give some days; if you come back and say you’ve not settled, I will know the proper order to make,” Ekwo said, adjourning the case to November 11, 2024, for a report on the settlement.

Backstory

In 2021, Shell announced its intention to divest its Nigerian onshore assets due to the incompatibility of its long-term energy transition strategy with the challenges of operations in Nigeria, marked by theft and oil spills.

After a pause in the divestment process in 2022, Shell resumed talks in June 2023 to sell its 30% interest in the joint venture known as SPDC, which operates onshore and in shallow-water oil and gas fields.

With President Bola Tinubu’s new administration, which began in May 2023, advisers recommended closing outstanding divestments sought by international oil producers to enhance petroleum output.

Some months ago, NUPRC established a divestment framework to oversee the evaluation of applications for ministerial consent regarding the Shell Petroleum Development Company of Nigeria Ltd. (SPDC) divestment process.

However, civil society groups, led by Amnesty International, have called on the Nigerian government to block Shell Plc’s proposed sale of its onshore oil business in Nigeria.

Renaissance Consortium stated, “We are pleased to announce the signing of a landmark transaction with Shell International PLC to acquire its entire shareholding in The Shell Petroleum Development Company of Nigeria Limited (SPDC).”

Renaissance, a company comprised of Petrolin Group, has been a preferred partner in the petroleum sector, supporting African business opportunities by connecting them with global realities.

For the Shell Petroleum Development Company of Nigeria Limited (SPDC) deal with Renaissance Consortium, NUPRC later revealed that documents have been submitted by SPDC and are “undergoing due diligence.”

Meanwhile, in a statement on September 11, 2024, NUPRC’s Head of Public Affairs and Corporate Communication, Mrs. Olaide Shonola, denied reports claiming that the Commission has accepted Shell International Plc’s bid to sell its onshore assets to Renaissance in a transaction worth $1.3 billion.

As part of the Commission’s commitment to transparency and accountability, it will communicate its position on the transaction to the public at the appropriate time. Industry stakeholders and the general public are advised to disregard the publication as it is baseless.”

NAIRAMETRICS.