A debt that Shell Plc and seven Nigerian bank is owed by a domestic oil producer in the West African nation in relation to a 2015 asset sale has risen to about $2.6 billion, according to people familiar with the matter.
(Bloomberg) — A debt that Shell Plc and seven Nigerian bank is owed by a domestic oil producer in the West African nation in relation to a 2015 asset sale has risen to about $2.6 billion, according to people familiar with the matter.
Aiteo Eastern E&P Co. bought a pipeline and an operating interest in one of the nation’s most-prized onshore oil blocks eight years ago for $2.4 billion. Zenith Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc and other local lenders loaned the company $1.5 billion to support the acquisition, while Shell – the seller of the permit – provided $504 million in funding.
The parties have been locked in a legal dispute since late 2019, when the creditors notified Aiteo that it was in default.
The lenders’ position is that Aiteo’s outstanding debt has climbed to about $2.6 billion once interest, fees and penalties are included, said the people who asked not to be identified because the matter is the subject of litigation and arbitration, and discussions between the parties are confidential. The figure stood at $1.7 billion at the end of 2021 and $910 million a year earlier, according to statements made by the creditors in court and arbitration filings.
In a 2019 court filing, Aiteo said it had already repaid $1.2 billion and denied being in default. The company didn’t respond to a request for comment. Shell and the other lenders either declined to comment or didn’t respond to emailed questions.
Read more: Shell, Nigeria’s Aiteo Locked in Legal Battle Over Loan Default
Daily output from the block in the southern Bayelsa state was 43,000 barrels of oil equivalent when the transaction was concluded, Shell said in 2015. Aiteo, owned by Nigerian tycoon Benedict Peters, has struggled to achieve anticipated production improvements.
Production halted completely in February last year and only resumed in May, the people said. The financial institutions are working to finalize a new repayment schedule with the firm, they said.
These loans “represent significant credits on the books” of the exposed organizations, the Lagos-headquartered Africa Finance Corp., which administers the financial agreement between Aiteo and the banks, said in written evidence to an English court last year. “A default under the loans would be a very serious matter.”
While energy giants like Shell and Chevron Corp. produce most of Nigeria’s oil, international companies have been offloading onshore assets to local players for more than a decade — a trajectory that is set to accelerate in the coming years. Aiteo’s multibillion-dollar purchase of a block from a consortium comprising Shell, TotalEnergies SE and Eni SpA remains the biggest of these divestments to date.
Court Battles
Informed that it was in default in October 2019, Aiteo responded by obtaining an injunction from a Nigerian federal court that prevented its creditors from collecting on the debt demanded, which then stood at $288 million. The firm argued that the financiers were obliged to restructure its repayment schedule because of unforeseen “events of force majeure,” including oil theft and pipeline leaks.
Having restarted production, Aiteo plans to barge crude to an export terminal rather than use its pipeline, which has experienced significant disruptions and losses, according to one of the people.
The lenders initiated arbitration proceedings against Aiteo in London in December 2020, which are ongoing. Peters’ company has also sued Shell in two other cases before Nigerian courts, blaming the UK-headquartered oil major for the firm’s “purported inability” to “fully repay its alleged indebtedness.”
Aiteo has alleged in court filings that Shell misrepresented the condition of the pipeline it sold in the 2015 deal and falsely presented itself as the owner of six oil wells the buyer believed were included in the transaction. Shell says the two lawsuits are baseless.
Read More: Nigeria’s Aiteo Sues Shell Over Wells as Legal Disputes Escalate
–With assistance from Gina Turner.
(Corrects attribution in headline and lead of story published July 13.)
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