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Neconde files arbitration case against Shell over continued withholding of remittances

Key indigenous play in Nigeria’s oil and gas industry, Neconde, has instituted an arbitration case against Royal Dutch Shell as it continues to lift crude and failed to remit funds after a lease on an oil field had been sold.

The oilfield in question, Oil Mining Lease (OML) 42, is also at the centre of corruption allegations. Shell filed a criminal complaint against a former employee in late March over suspected bribes in the $390 million sale of the field.

According to the chief executive officer of Neconde, Frank Edozie, his group bought a stake in OML 42 from Shell in April 2011, but Shell had continued to produce crude there until the petroleum ministry approved Neconde’s licence in November that year.

He said “It was producing and lifting crude although the asset had, by deed of transfer, moved to Neconde. Shell lifted the crude and held the proceeds – nothing was given to Neconde. That is the matter we are taking to the court of arbitration in the UK”.

Edozie, recalled that Neconde launched the arbitration case in London late last year in an attempt to recoup its money even though it failed to state the amount involved.

However, a Shell spokesperson confirmed there was “arbitration between Neconde and Shell”, but did not give further details.

Edozie added that his company was “under significant pressure to keep up with payments to banks” and was holding talks to restructure its debt and raise equity.

“We are looking for between $500 million and $600 million,” said Edozie, adding that the energy firm was dealing with a consortium of lenders.

Continuing, he said financiers on the OML 42 acquisition included international lenders: Africa Finance Corp, FBN Bank UK, Glencore and Afrexim.

Also, Guaranty Trust Bank, Diamond Bank, Fidelity Bank and Access Bank were domestic banks in the mix. Edozie said the company had been in talks with lenders to refinance its loans.

“We are in the market for debt, then we are on a journey to proof of the asset,” he added.

Edozie said crude production at the oilfield stood at around 80,000 barrels per day (bpd) and it aimed to increase that to 110,000 bpd by the end of 2018.

He said the company had recently decided to transport crude by barge because of the disruption caused by pipeline vandalism by militants in the southern Niger Delta, first in 2011 and later in 2016.

Nigeria’s Forcados terminal is ramping up after a temporary shutdown on the Trans Forcados Pipeline, Shell before the end of last week.