The first salvo in a brewing legal battle over oil mining lease (OML) 25 has been fired with the release of a statement by James Bay Resources, listed on the Canadian Securities Exchange, that it has retained international law firm Amsterdam & Partners LLP in connection with the Company's petroleum interests in Nigeria. The firm is expected to launch legal action on behalf of James Bay in respect of OML 25, which Shell divested last year.
Crestar Integrated Natural Resources Limited won the bid for OML 25. Crestar is special purpose vehicle owned 45 per cent by James Bay while 55 per cent is owned by a number of oil and gas professionals, including Niyi Olaniyan, the founder and CEO of Crestar, who is ex Shell, and Osten Olorunsola, the former Director of Petroleum Resources (DPR).
Crestar is said to have won the coveted asset in this round of Shell's onshore divestment, after bidding a reported $450 million. In the statement, James Bay said that Crestar paid the full purchase price for the Shell joint venture's (JV) interest in OML 25 into an escrow account with JP Morgan in June 2014. Final closing of any transfer of an interest in a Nigerian oil and gas licence or lease is only achieved when the consent of the Minister of Petroleum Resources to the transaction is obtained. It seemed it was only a matter of time for these Nigerian oil and gas professionals to achieve the true intent of the local content initiative.
It was not to be however. For the first time in the history of the Shell divestments, the Nigerian National Petroleum Corporation (NNPC), a 55 per cent owner of the asset, decided to exercise its right of pre-emption, contained in the terms of the joint venture agreement, to buy the asset itself. On the face of it there is nothing wrong with that exercise. James Bay however claims that the right pre-emption had in fact expired and had expressly been waived.
Before resorting to legal action, as James Bay now appears to have done, the Crestar shareholders mounted a campaign to try and resolve the situation. There were diplomatic missions to political figures in Abuja to intercede on their behalf. The Canadian ambassador to Nigeria was drafted in to lend his effort in the mission to get a resolution. Then rumours surfaced that an alleged rift between the Minister of Petroleum and Olorunsola, by then, Crestar's chairman, who was sacked by the Minister the year before was to blame. Determined not to let the valuable asset slip away from them, Crestar offered Olorunsola up for the chop and he stepped down as chairman of Crestar, but to no avail.
Now, it seems that only an about turn by NNPC will avert the brewing legal action. It is not clear from the statement who James Bay intends to sue: Shell and its joint venture partners? NNPC? The Ministry of Petroleum Resources? The Federal Government of Nigeria? What is clear is that the appointment of Amsterdam & Partners led by Robert Amsterdam, said to be a veteran of combats with governments around the world including Nigeria and Zambia is meant to sound a warning that this battle will be hard fought. Robert Amsterdam lists Nasir El-Rufai, former Minister of the Federal Capital Territory of Abuja among his high profile Nigerian clients.
Amsterdam makes it clear in the James Bay statement that they expect the timing of the legal action, just before the election, to cause political embarrassment. Robert Amsterdam is quoted as saying, "The fact that this saga is playing out on the cusp of a hotly-contested election promises more than just a legal fight, it guarantees a demand for political review at the highest levels."
NNPC is yet to comment publicly on the reason behind its exercise of the pre-emption rights and how the State owned corporation, already struggling to meet cash calls for its joint ventures, intends to pay for the acquisition. James Bay alleges in the statement that it has evidence, which NOGintelligence has not seen, that NNPC is trying to fund the acquisition from private third parties. Any such arrangement, they claim, would violate Nigerian laws regulating government borrowing.
This would be a good time for NNPC to comment and make it clear to the general public what is going on. If it is indeed seeking funding, it may already have approval from requisite quarters for such funding. Remaining silent only continues to perpetuate the rumours and the ever present whiff of wrongdoing.
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