A Canadian firm and member of Crestar Consortium that won the bid for Shell’s Oil Mining Lease (OML) 25, James Bay Resources Limited, has welcomed the decision of a Federal High Court restraining the Nigerian National Petroleum Corporation (NNPC) from acquiring the 45 per cent interest of Shell, Total and Agip in the disputed oil block.
James Bay is a part-owner of Crestar Integrated Natural Resources Limited, which was the winning bidder in May 2014 for the Shell’s 45 per cent participating interest in OML 25, and had deposited 100 per cent of the purchase consideration into an escrow account with JP Morgan in London.
The company said in a statement that Crestar commenced the legal action after NNPC attempted to block the sale and acquire the interest for itself under a 30-day contractual right of first refusal that had expired months earlier.
According to the statement, Crestar commenced injunction proceedings to restrain the Shell JV from effecting a transfer to NNPC or anyone else, adding that the injunctions were granted on a preliminary basis.
“The Shell JV subsequently sought to discharge the injunctions, but the Federal High Court dismissed the Shell JV’s application on March 6, 2015, and reaffirmed the injunction pending a further hearing expected to occur on March 17. Concurrently with its injunction request against the Shell JV, Crestar delivered a 30-day pre-action notice to NNPC, as required by Nigerian law in advance of any legal proceedings against the state-owned petroleum corporation. That statutory notice period will expire on March 11, 2015 and Crestar will then be at liberty to commence direct legal action against NNPC,” the statement said.
The Canadian firm added that “this wrongful exercise of an expired pre-emption right by the NNPC represents the NNPC’s first-ever exercise of preemption rights in the history of the Shell JV’s divestment from Nigeria.”
“In addition to unprecedented attempt to exercise expired pre-emption rights, Crestar also believes it will be able to show that the NNPC is attempting to fund its own acquisition with monies obtained from private third parties in exchange for lucrative interests in OML 25, which arrangement would almost certainly violate several Nigerian laws regulating government borrowing,” the statement added.
Commenting on the court case, the Chief Executive Officer of James Bay, Mr. Stephen Shefsky said his company was pleased with the court’s decision to affirm the injunctions and suspend the transfer to NNPC so that Crestar’s own right to acquire the interest in OML 25 would be adjudicated.
“NNPC’s attempt to preempt Crestar’s acquisition of OML 25 is wrongful and James Bay will work with Crestar to pursue all available remedies to secure all value to its shareholders which may be lost as a result of these actions,” he said.
Crestar is owned 55 per cent by Crestar Hydrocarbon Exploration and Production Company Limited, a fully indigenous company owned exclusively by Nigerians, while the remaining 45 per cent of Crestar is owned by James Bay.
Crestar defeated other competitors, including Lekoil, a consortium made up of Greenacreas Energy, CCC and Signet Petroleum, and another consortium consisting of Niger Delta Petroleum (NDPR) and South Atlantic Petroleum (SAPETRO).
NNPC had moved to stop the sale of OML 25 to Crestar consortium, citing its right of first refusal in the Joint Operating Agreement (JOA) between the corporation and the JV partners.
But Crestar challenged the action in court, saying that the 30-day contractual right of first refusal had expired several months before the NNPC exercised the rights.