A Federal High Court sitting in Lagos has ordered the immediate blockage of 20 bank accounts operated by Shell Petroleum Development Company (SPDC) over an alleged theft of over 16 million barrels of crude oil belonging to Aiteo Eastern E&P Company Limited.
The presiding judge, Justice Oluremi Oguntoyibo, while giving the order in suit no FHC/L/CS/52/2021, held that she was making the order pending the hearing of the motion and determination of the motion on notice for interlocutory injunction filed before it by the indigenous company.
Justice Oguntoyibo further restrained SPDC and other defendants, including Royal Dutch Shell, Shell Western and Trading Company Limited, Shell International Trading and Shipping Company Limited, as well as Shell Nigeria Exploration and Production Company Limited from withdrawing funds standing to their credit without first “ring-fencing” them to the value of the 16,050,000 barrels of crude oil. According to the court, on no account must any transaction be carried out in the listed accounts without first, “ring-fencing any cash, bonds, deposits, all forms of negotiable instruments to the value of $2.7 billion and paying all standing credits to the Shell companies up to the value into an interest yielding account in the name of the chief registrar of the court, who is to hold the funds in trust” pending the hearing of the motion.
The court further noted that pending the hearing and determination of the motion on notice for interlocutory injunction, the named banks were restrained in the interim from accepting, honouring, or giving effect to any mandate, cheque or instructions presented by the defendants.
The certified true copy was signed by the Registrar of the Court, Mrs. Oluwakemi Obalaja.
In its statement of claim, Aiteo stated that the defendants, that is SPDC and its sister companies, had a deliberate corporate policy to unjustly enrich themselves at the expense of the plaintiff and other local oil companies.
It affirmed that with the use of a wrong metering system, SPDC and the four other associated companies understated and retained crude oil volumes due to the company to the detriment of Aiteo.
Aiteo averred that the officials and agents of the defendants were aware of the wrongful appropriation of the plaintiff ’s crude oil but did nothing to prevent or stop it until directives were issued by the Department of Petroleum Resources (DPR).
The local oil company argued that the only means by which the defendants could conveniently appropriate the plaintiff’s crude oil illegally was to understate the crude oil volume belonging to Aiteo.
“The monetary benefits obtained by the defendants were also retained by the said defendants.
The defendants continued to use the understated oil volumes and proceeds for their personal use.
“The defendants were unjustly enriched by the use of the unapproved meter and continue to unjustly enrich themselves.
“Their actions were without any concern, consideration, and or regard for the detrimental effect same had and would have had on the plaintiff,” Aiteo said.
According to the indigenous oil company, SPDC and its co-travellers made use of the coriolis meter in bad faith and was meant to deceive Aiteo regarding the amount of crude oil volumes due to it.
The company maintained that the coriolis meter has poor zero stability which affects flow meter accuracy, cannot be used for fluids with lower density and is sensitive to external vibration interference, among others, adding that it was also a matter of national security.
It claimed that the action by SPDC deprived Aiteo of refundable crude and has affected its business negatively, insisting that contrary to the figures by DPR, Aiteo experts have concluded that 16,050,000 barrels were stolen.
According to the company, it is entitled to the sum of $1,275,975,000, being the amount it would have sold the over 16 million barrels of crude oil at the rate of $79.50 per barrel being the prevailing price in July 2018.
Alternatively, it added that if DPR figures are used, then the 1,022,029 barrels would yield about $81.2 million, saying that because of the “fraudulent” action of the defendants, it became practically impossible to meet its repayment obligations to its financiers who provided it with the sum of $1,488,000,000 to acquire assets.
“The plaintiff further states that the fraudulent and or wrongful act by the defendants impacted negatively on both the production level and the revenue available to it for debt servicing and operation.
“Furthermore, the constant theft and larceny of the plaintiff’s crude by the 1st defendant and the intentional act to understate and deprive the plaintiff of its crude as observed by DPR negatively impacted on the plaintiff ’s ability to properly service the loans and interests thereon,” Aiteo averred.
Some of the lawyers to Aiteo include Kemi Pinheiro, Mike Ozekhome, Yakubu Maikyau, Muiz Banire, Oladapo Olanipekun, Emeka Ozoani, all Senior Advocates of Nigeria (SAN).
Before Aiteo approached the court, the regulatory agency for the oil and gas sector, DPR, had ordered SPDC, a subsidiary of Royal Dutch Shell, to refund 2,081,678 barrels of crude oil understated between 2016 and 2018.
The DPR, in several official communications on the matter, also sanctioned the international oil company (IOC) for the infraction, to which SPDC has already admitted in another official letter to the DPR.
As part of the punishment for flouting the rules between June and July of the years under review, Shell was directed to pay a sum of N250,000 while it also agreed to a 10-month compensation plan to reimburse its Joint Venture (JV) partners who were short-changed in the course of the infractions.
The DPR accused the company of cheating some of its JV indigenous oil concerns, including Aiteo, Belemaoil, Eroton and Newcross, through an unapproved metering system, which it used to misappropriate crude oil.
In one of the letters conveying the position of DPR to SPDC, referenced DMR/ CTO/COA/Com/V.3/102 and signed by one U.K Ndanusa, for the director of DPR, Sarki Auwalu, the regulatory agency quoted part of the regulation flouted by the company as part 1, section 2(d) of the Mineral Oil Safety Regulation and the Provisions of Section 51 of the Petroleum Act 1969.
In another memo from the regulatory agency, dated July 8, 2020, it recalled its earlier rejection of the unapproved coriolis meter and directed SPDC to begin the process of reimbursing Aiteo of 1,022,029 barrels, Belema Oil’s 39,374, Eroton’s 643,245 and Newcross’ 377,030 barrels of stolen crude.
Furthermore, in a letter dated February 8, where SPDC admitted to wrongdoing, and signed by the Business Relations and JV Excellence Manager, Steve Okwuosah, it pledged to implement the refund of the barrels in batches.
The SPDC stated: “We note your (DPR’s) directives as contained in the above-referenced letter and wish to confirm that the SPDC will implement the refund of the 2,081,678 barrels crude oil” in accordance with the schedule communicated by the regulator.
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