How Nigeria finds itself in $9 billion mess

By Adetokunbo Abiola
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The Federal High Court in Abuja has ordered the closure of operations of Process and Industrial Development Limited (P&ID) and P&ID Nigeria Limited (P&ID).

It also held that P&ID Nigeria Limited, which is the second defendant, forfeits its assets to the federal government of Nigeria.

Justice Inyang Ekwo gave the order following the arraignment of the companies by the Economic Financial Crimes Commission (EFCC).

This follows a judgment by a British judge giving Process and Industrial Developments Ltd (P&ID) the right to attempt to seize some $9 billion in assets from the Nigerian government over an aborted gas project

 In a reaction to Ekwo’s judgement, Process & Industrial Developments Limited has said it will continue its efforts to identify and seize Nigerian assets

The company said the President Muhammadu Buhari administration isn’t showing any willingness to negotiate in good faith in order to resolve the crisis.

P&ID accused the federal government of carrying out a targeted campaign of unlawful and illegal detentions aimed at innocent individuals associated with the company.

 P&ID called on the government of Nigeria to accept its responsibilities under the law, and to cease the unlawful detentions of its personnel in Nigeria.

And so the battle between the federal government and P&ID continues, but how did Nigeria find itself in this messy situation?

The saga began on a day in January 2010, when late petroleum resources minister, Rilwanu Lukman, for Nigeria, and Irish Michael Quinn, also now deceased, of the Projects and Industrial Development, P&ID, signed an agreement.

P&ID was to build gas processing facilities around Calabar, Cross River State, and the government was to supply wet gas up to 400 million standard cubic feet per day.

According to documents submitted by P&ID to London courts, it would process the wet gas into lean gas. The processed gas from the pact was enough to generate 2,000 megawatts of electricity. P&ID would sell 15 per cent of the propane, ethane and butane by-products on the international market, with an expectation of generating “$5bn to $6bn in profit over a 20-year period.”

The GSPA would have transformed Nigeria’s power sector, boosting jobs, and the federal government was due 10 per cent shareholding in the business.

Unfortunately, the project was doomed from the beginning, because it was conceived  during the political crisis of 2009,  when Yar’Adua’s illness created a power vacuum.

When Jonathan assumed political control in February 2010, he treated the contract with contempt, not doing anything about it.

This reporter learned oil companies supposed to facilitate gas supply also did nothing about it.

According to Premium Times, although Addax, the operator of OML 123, where gas was expected for the first phase of the project, was co-opted into the discussions leading to the agreement, there was no definitive commitment to make available the wet gas in terms of content and quantity required by P&ID.

In fact, two years after the agreement was signed, Addax informed P&ID it could not make any gas supply under the agreement between the federal government and P&ID.

Exxon, which was part of the deal, was not brought into the discussions, even though the 250 million standard cubic feet required for the second phase of the project per day was to come from its OML 67 operation.

There were no definitive plans around the requisite infrastructure for off-taking gas by the government for power generation.

P&ID had no contract with Addax and Exxon and therefore had to send several letters subsequently to government officials towards having the cooperation of the oil companies.

P&ID wrote many letters to the federal government about the contract, but the letters were treated with levity.

By the time the contract failed, P&ID claimed it had spent $40 million, and it was determined to get its money back.

 Actually, Nigeria had many chances to halt the problem, but it did not exercise its options.

For instance, the decision on the UK as the seat of arbitration was made in 2016, and the arbitration award was made in 2017. Nigeria had 28 days in each case to appeal. It appealed the former decision, but missed the deadline by several months and a judge dismissed it.

Instead of appealing the latter decision, Nigerian officials didn’t do so.

The government could negotiate with P&ID over the money it claimed it spent on the project, but instead of negotiating with the company, it’s trying prosecute it over the failed contract, a move which could incense P&ID to seize Nigerian assets outside the country.

P&ID can target real estate, bank accounts or any kind of moveable wealth in Britain, but it has to prove that the property is unrelated to this country’s operations as a sovereign state.

State assets that have any diplomatic function – such as a commercial property that is also used to issue visas – cannot be seized.

But state asset seizures “happen all the time”, said James Langley, a partner with international law firm Dentons and an expert in arbitration.

In other words, Nigerian assets are at risk, because the federal government holds bank accounts in Britain.

The NNPC also owns some of the oil cargoes that sail from the country’s shores, and any of these can be seized.

However, a British  judge would have to rule on whether any individual asset was subject to seizure.

Nigerian assets in other countries can be seized.

The arbitration award also allows P&ID to seek to seize assets in any of the 160 countries that are part of the New York Convention.

There is a long history of successful asset seizures using the New York Convention.

In August 2018, ConocoPhillips seized some Venezuelan oil cargoes in the international waters, after an arbitration panel awarded two billion dollars in damages against the oil-rich.

After winning the arbitration ruling in April, 2018, ConocoPhillips seized the inventories of Venezuelan oil company, Petróleos de Venezuela, on several Dutch Caribbean islands. The move seriously hampered Venezuela’s efforts to export oil to the United States and Asia, and emboldened other creditors to seek financial retribution.

Also, on August 23, South African authorities impounded an Air Tanzania Airbus plane that was flying from Johannesburg to Dar es Salaam over a $33 million debt awarded to a South African farmer.

It is likely the last has not been heard about brouhaha between P&ID and the federal government.