Nigerian oil producer sues Shell for over $2 billion over ownership of wells


A Nigerian oil producer has sued Royal Dutch Shell Plc for more than $2 billion over ownership of oil wells, escalating a dispute over an asset sale concluded six years ago.

Aiteo Eastern E&P Co. Ltd. claims Shell misrepresented itself as the owner of six wells which it said were included in a 2015 asset sale but were in fact owned by the West African nation’s state-owned energy company. Aiteo said he was deprived of more than 70 million barrels of crude and wants a judge to order Shell to pay compensation.

The lawsuit is the latest demonstration of the extent to which relations between the companies have deteriorated since Aiteo acquired a major stake in a prized oil block operated by Shell. Apart from the latest litigation, the Anglo-Dutch giant and other lenders allege that Aiteo owes them nearly $1 billion, while the Nigerian firm claims it was misled by Shell.

Shell made “fraudulent claims” on six of the 100 wells included in Petroleum Exploitation License 29, known as OML 29, which had been transferred to the Nigerian National Petroleum Corp. in 2009, Aiteo said in a lawsuit filed in federal court in Abuja on July 27. The buyer only discovered he did not own the infrastructure last year when he participated in a government auction of so-called marginal fields, according to the complaint, which the media reported for the first time this week.

Shell “has fulfilled its obligations under the sale and purchase agreement signed between the parties and has acted in accordance with applicable Nigerian laws,” a spokesperson said by email. The company “will defend its position”, he said.

The Department of Petroleum Resources, which oversaw the recent licensing round, did not respond to questions.

Aiteo acquired a 45% stake in OML 29 from a consortium comprising Shell, TotalEnergies SE and Eni SpA, with NNPC retaining the remainder. The sale price of $2.4 billion was the highest paid to date by Nigerian producers, who have been buying onshore and offshore shallow water assets from international oil companies for more than a decade.

Materials provided by Shell indicated that the half-dozen wells contained 73 million barrels of oil, according to the lawsuit. The Nigerian firm is entitled to $2.1 billion to cover its share of the lost crude, according to the complaint.

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Shell and Nigerian banks, which provided $504 million and $1.5 billion respectively to support the purchase of OML 29, were already embroiled in a dispute with Aiteo over allegations of default. Outstanding debt stood at $910 million at the end of September 2020, including $233 million owed to Shell, according to documents creditors submitted in December to the International Chamber of Commerce in London.

Aiteo, controlled by Nigerian tycoon Benedict Peters, blames Shell for its difficulties in repaying loans and is already battling the company in two other cases in courts in Abuja and Lagos.

Aiteo’s “alleged inability” to “fully repay its alleged debt to its financiers is directly attributable to the wrongful actions” of Shell, the Nigerian company said in the latest lawsuit.

Photograph: An employee approaches the entrance to the Agbada 2 Oil Flow Station, operated by Shell Petroleum Development Co. (SPDC) in Port Harcourt, Nigeria. Photo credit: George Osodi/Bloomberg

Copyright 2022 Bloomberg.

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