Shell responds no basis for Aiteo’s Mareva injunction to freeze bank accounts

*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 with the use of a wrong metering system, retaining crude oil volumes due to the company, says Aiteo

*The allegations of crude diversion/theft against SPDC are untrue, and we urge that the accusations be disregarded ─SDPC Nigeria

Alexander Davis | ConsumerConnect

Following the recent order of interim Mareva injunction blocking bank accounts of the international oil company and four of its subsidiary companies in all commercial banks in the country, Shell Petroleum Development Company of Nigeria Limited (SPDC) has faulted the ex parte by a Federal High Court at Ikoyi, in Lagos.

The SPDC said “… we believe (the Mareva injunction) was obtained by Aiteo without any valid basis.”

‘Mareva injunction’ refers to an injunction ‘preventing transfer of assets abroad’; that is, an injunction allowing a court to freeze a defendant’s assets to prevent them from being transferred overseas.

Justice Oluremi Oguntoyibo of a Federal High Court sitting in Lagos had granted an order of interim mareva injunction immediately blocking bank accounts of Shell and four of its subsidiary companies in all commercial banks pending the final determination of a suit filed by Aiteo Eastern E & P Company Limited before the court.

Bamidele Odugbesan, Manager, Media Relations at Shell Nigeria, in a statement Friday, February 19, 2021, however, said some media reports had linked the court order to the allegation of crude diversion against SPDC.

Shell’s Oil and Gas Terminal on Bonny Island, Rivers State

The Media Relations Manager stated it is important to note the claims underpinning the interim freeze order obtained by the plaintiff, Aiteo Eastern E&P Company Limited, relate to the sale of the interests of SPDC and two other SPDC JV partners in the Nembe Creek Trunk Line (NCTL) and oil mining Lease (OML) 29 to Aiteo in 2015.

Others are crude reallocation programme between injectors into the SPDC JV’s Trans Niger Pipeline, and injectors into Aiteo’s NCTL which is a normal industry practice, said Odugbesan.

The oil multinational said: “The disputes are subject of ongoing litigation and SPDC is working to secure an expeditious discharge of the freezing injunction which we believe was obtained by Aiteo without any valid basis.

“The crude theft/diversion allegation is also factually incorrect. This is a distinct issue that relates to the directive by the Department of Petroleum Resources (DPR) to SPDC as operator of the Bonny Oil and Gas Terminal, an asset belonging to the SPDC Joint Venture, to implement a crude re-allocation programme between injectors into the SPDC JV’s Trans Niger Pipeline and injectors into the NCTL.”

The statement further noted: “Crude allocation review and re-allocation is a normal industry practice to re-allocate previous provisional allocated volumes under the directive and supervision of DPR, and this is not an exercise resulting from crude diversion, underreporting or theft at the terminal.

“This industry practice is not peculiar to the SPDC-operated Bonny Oil and Gas Terminal alone and does not translate into any loss of volumes to the Federal Government of Nigeria.

“The re-allocation in issue was initiated by SPDC as operator of the Bonny Oil and Gas Terminal, while the DPR (Department of Petroleum Resources) validated and confirmed it for implementation for the concerned oil producers.”

Crude oil production metering and allocation are subject to specific guidelines issued by the industry regulator, DPR, and SPDC strictly adheres to these guidelines and the implementation is regularly verified by the regulator, stated he.

Odugbesan noted that the DPR had in response to media enquiries on Saturday, February 13, 2021 described the allegations of crude diversion/theft against SPDC as untrue and urged that the allegations be disregarded.

The company said: “SPDC and all Shell companies in Nigeria are responsible corporate citizens who conduct their operations in accordance with applicable laws and industry best practices.”

Recall that Justice Oguntoyibo’s order of interim Mareva injunction has blocked 20 bank accounts belonging to the Shell Petroleum Development Company of Nigeria Limited (SPDC), Royal Dutch Shell Plc, Shell Western Supply and Trading Limited, Shell International Trading and Shipping Company Limited and Shell Nigeria Exploration and Production Company Limited.

A Federal High Court gave the order pending the hearing and final determination of the motion for an interlocutory injunction in a suit delineated FHC/L/CS/52/2021 filed before it by Aiteo.

The order of the court restrains Shell from withdrawing funds standing to their credit without first “ring-fencing” them to the value of the 16,050,000 barrels of crude oil and must on no account carry out any transaction on 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 held that pending the hearing and determination of the motion on notice for an interlocutory injunction, 20 listed commercial banks are restrained in the interim from accepting, honouring or giving effect to any mandate, cheque or instructions presented by the companies.

Aiteo in its statement of claim, had alleged that 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 with the use of a wrong metering system, retaining crude oil volumes due to the company to the detriment of Aiteo.

Aiteo purported that the officials and agents of Shell are conscious of the wrongful appropriation of its crude oil, but did nothing to prevent or stop it until directives were issued by the Department of Petroleum Resources (DPR).

It contended 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 company in its claim maintained that SPDC and its subsidiaries made use of the Coriolis meter in bad faith to deceive it regarding the number of crude oil volumes due to it, maintaining that the Coriolis meter has poor zero stability which affects flow meter accuracy and cannot be used for fluids with lower density and sensitive to external vibration interference, among others.

Aiteo described the matter as that of national security and claimed that the action by SPDC deprived it 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, is 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 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 impossibility to meet its repayment obligations to its financiers who provided it with the sums of $1,488,000,000 to acquire assets.

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.

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