ExxonMobil, Shell, Chevron to pull out from billion-dollar lawsuit against NNPC Limited

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After finalising new terms for deep-water oil production in Africa’s biggest oil-producing country 10 days ago, ExxonMobil, Shell, and two other multinationals have announced plans to withdraw their multibillion-dollar lawsuits against Nigerian National Petroleum Company Limited.

According to court letters seen by Bloomberg, ExxonMobil, Shell, Chevron and Equinor agreed to an out-of-court settlement with NNPC Limited and will terminate ongoing litigation once the new arrangements take effect.

“Lawyers for Equinor and Chevron asked the judge to suspend the case until the end of October to allow sufficient time for the conditions to be satisfied and for the settlement agreement to become effective,” letters to two New York federal judges showed.

Once that happens, the companies “expect to withdraw this action,” the letter said. Exxon and Shell anticipate being able to do the same after 60 days, they said in a separate letter.

None of the five companies involved immediately responded to requests for comment.

How it all started
In 2017, the oil majors sued NNPC Limited in the United States of America’s court to force the latter to pay out $1 billion in alleged overpayments on OML 128 where the prolific Agbami field is located.

Statoil and Chevron’s Nigerian branches had in mid-March 2017, requested a federal court in New York to uphold an arbitral decision ruled in their favour in March 2015 over their dispute with NNPC.

At the time, an arbitral court based in Nigeria had asked NNPC to pay nearly $1 billion to the majors to cover the excess amount it had earned when redistributing revenue from OML 128, which encloses the giant Agbami field (240,000 bpd), Africa Energy Intelligence reported.

It added that the NNPC motioned an appeal to the Federal High Court in Lagos which issued a counter-ruling in May 2015 stating that Statoil had to pay $1.1 billion to NNPC.

According to Africa Energy Intelligence, Statoil and Chevron didn’t accept the verdict and proceeded to take the battle to the New York court where they are asking NNPC to promptly pay the same amount as the March 2015 sentence — $1 billion.
The majors were represented by the law firm, Freshfields Bruckhaus Deringer, but also have the support of Nigerian lawyers, Babatunde Fagbohunlu, a partner at Aluko & Oyebode currently defending Chinese group, China National Offshore Oil Corporation (CNOOC) against Abuja, and Olasupo Shashore, former public prosecutor in Lagos, it added.

Efforts to speak with the parties in dispute proved abortive as none of them was willing to comment on it pending the adjudication of the suit.

In 2012, a Federal High Court in Abuja voided two separate arbitration awards worth $5.25 billion (about N840 billion) against the NNPC in favour of some oil exploration companies in the country.

In the first case, the court voided the arbitration award of $3.45 billion and the $1.8 billion award in the second suit.

Trial judge, Justice Adamu Bello, in the two judgments that lasted over three hours, held that the subject matter of the arbitration, the interpretation, application and administration of the Petroleum Profit Tax Act and the Deep Offshore Act, Education Tax Act and Company Income Tax Act were functions solely to be carried out by Federal Inland Revenue Service (FIRS), and not the oil companies as they had done and had wanted to continue doing.

FIRS had filed the action to impeach the arbitral proceedings initiated against NNPC by oil majors in the country outside the country, on the grounds that the tax issues raised in the arbitration proceedings were not resolvable by arbitration.

Shell, Esso, Nigerian Agip, and Total Exploration had, following a dispute over the production sharing contract entered into on April 19, 1993, over Oil Mining Lease (OML) 118, in Bonga oil field, dragged NNPC before an arbitration panel which sat in South Africa and another European country and awarded costs against Nigeria.

Even before the arbitration panels entered their judgments, FIRS was in court contending that the issues raised by the oil companies in the arbitration panels concerned taxation, which reference had been made to the arbitration and was not one which was allowed by law to be settled by arbitration.

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