Nigeria's foremost Online Energy News Platform

Why the NNPC is being dragged to US courts by Exxon Mobil, Shell

Royal Dutch Shell Plc and Exxon Mobile Corp. have instituted legal actions against the Nigerian National Petroleum Commission (NNPC) in the United States of America.

The oil companies are trying to get US courts to enforce a $1.8 billion arbitration wins they secured against the NNPC in 2011 after initially suing the state-owned oil company for breaching their contract.

Shell OML 11, Shell joins market rivals, writes down $2.3 billion as US-China trade war bite 

Last September, the two companies tried but failed to secure a similar enforcement in the US after the US District Court for the Southern District of New York dismissed their case. Judge William Pauley, who was in charge of the case, cited the fact that Exxon and Shell had many pending appeal cases in Nigeria as the reason for his ruling.

Here’s a little backstory: Some years ago, Exxon Mobil and Shell accused the NNPC of contractual breach. According to the oil companies, the NNPC was collecting more crude than it was entitled to, in line with a 1993 deal they signed with the Nigerian Government to develop some deep offshore blocks. Those deep offshore oil projects currently account for about 30% of Nigeria’s 2 million barrels daily output.

Following the accusation levelled against the NNPC, independent arbitration tribunals in Nigeria awarded Exxon Mobil and Shell damages to the tune of $1.8 billion. Interestingly, the NNPC took the case to court and won. According to the ruling, the disagreements were not tax disputes and therefore not subject to arbitration. Moreover, the tribunals lacked the authority to impose the $1.8 billion penalties, the court ruled.

Reason for the fresh suit in the US: As earlier mentioned, the oil companies took the case to the US. And after Judge William Pauley overturned their case, they are now filing a new one. According to court documents that were seen by Bloomberg, the companies are arguing that Nigerian courts are unfair and lack “the political independence to render impartial judgements in a high-value dispute”.

The companies also cited the long time it usually takes Nigeria’s Supreme Court as another reason they are filing the case in America. According to them, it can take up to a decade to get a ruling and this “renders the prospect of justice so illusory as to amount to no justice at all.”

Exxon Mobile and Shell are also now demanding for $2.7 billion in damages, citing accrued interests. The NNPC is expected to respond to the US appeal latest by April 10th.

The spokesperson to Nigeria’s Justice Minister, Abubakar Malami, declined to respond to a request for comment on the development. In the same vein, representatives of both companies said they cannot comment on ongoing litigation.

SOURCE: Nairametrics