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Oil companies’ lawsuit pressure Nigeria to extend contract terms
Kaieteur News – In order to put an end to a US multi- billion lawsuit with accrued interests, brought against them by four major oil companies, Nigeria’s state owned oil company was forced to sign a contract extending the Production Sharing Agreements (PSA) for the firms to pump more oil.
Exxon’s Chief Executive Officer, Darren Woods
Earlier this year, American oil giant, ExxonMobil, Royal Dutch Shell Plc., Chevron Corporation, and Equinor, had approached a United States court seeking to enforce two separate multi-billion dollars arbitration awards against Nigerian National Petroleum Corporation (NNPC).
Exxon and Shell had been seeking to enforce a US$1.8 billion arbitration award against NNPC from 2011, while Chevron and Equinor sought to enforce a US$995 million award from 2015. However, the awards have grown in size and were recently worth close to US$4 billion.
The lawsuits stemmed from accusations that the Nigerian state owned Oil Company drew more oil than permitted under the PSA from 1993. The contract was signed for the oil companies to invest billions of dollars to develop five deep water blocks, and share profits with NNPC.
Shell’s Chief Executive Officer, Ben van Beurden
Kaieteur News understands that the PSA was for the development of five deep water blocks, which Nigerian officials said could produce as many as 10 billion barrels of oil over 20 years.
According to reports out of Nigeria, the extraction from the deep water blocks, began in 2006, but disagreements arose after Exxon and Shell said that by late 2007 NNPC was at the Government’s behest “lifting” more oil than the contract allowed, depriving them [the oil companies] of billions of dollars. Notably, the Nigerian State owned Oil Company was responsible for extracting its own oil from the five deep water blocks. To put an end to the dispute and to secure an out-of-court, the oil giants agreed to put an end to their lawsuits after reaching a new deep water oil production sharing agreements with Nigeria, which will allow them to pump more oil.
On August 22, 2022, two US federal judges granted the request by the oil companies to put a hold on the court case with the aim of terminating it after a new agreement takes effect. The hold on the court litigation came days after NNPC renewed its agreement with the oil majors.
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