Just In: The Legal Battle Over OML 95, 10 Others Begins

Eleven oil firms whose licenses to operate marginal fields were revoked in April, this year, have asked the Federal High in Lagos to protect their over $290million worth of investment, following the Federal Government’s decision to offer 57 oil fields for competitive bid round, writes ROBERT EGBE

The Federal Government’s dispute with Owena Oil and Gas Ltd and 10 other oil firms over the revocation of their licences to operate marginal oil fields has thrown up two out of many other interesting arguments.

On the one hand, the government is offering oil fields for sale to boost the country’s finances, encourage local investors to collaborate and grow the oil sector.

On the other hand, the affected oil local firms argue among others that they deserve their licences back so they can resume work on the oil fields, having invested over $290 million on developing the fields already.

Fed. Govt’s case

The Federal Government on April 7, this year revoked 11 firms’ oil licences to operate marginal fields.

The government said they failed to meet the criteria to keep the licences 15 years after they were given their franchise.

The marginal oil fields include: Ekeh field – Oil Mining Lease (OML) 88; Ofa field in OML 3, OML 14, Atala in OML 83, Akepo in OML 90, Oriri field in OML 88, an onshore field located in OML 55, Ogedeh field in OML 90, Ororo field in OML 95, owned by Guarantee Petroleum Limited and Owena Oil and Gas Limited; Dawes Island field located in OML 54 and Tsekelewu field in OML 40.

Head of Media, Department of Petroleum Resources (DPR), Mr. Paul Osu, told The Nation at the time that the fields were allocated to the licensees since 2003 and their agreement with the government “was that the fields after five years from the period of allocation would be put into production”.

 

Insiders’ view

But industry stakeholders told The Nation at the time that “some of the licensees whose franchises were revoked have gone far in their operations and were only waiting for the DPR to grant them necessary permits to conduct Well tests, start production, evacuate and sell their crude oil and gas. Some of the licensees have even sold and have paid royalty fees, among others to government”.

They noted, for instance, that the operator of Ekeh oil field had paid royalty to the government having produced crude into tanks waiting for the DPR approval to evacuate and export. Another firm, they said, had pumped crude into the Forcados terminal while other fields had also gone far with their production process having drilled some of their Wells and were awaiting surface facilities to produce.

Legal battle begins

The Federal High Court in Lagos on May 27 agreed, in the interim, with one of the oil companies, Owena Oil and Gas Limited which operates the Ororo Marginal Field in OML 95.

Justice Muslim Sule Hassan on May 27 restrained the Minister of Petroleum Resources and Department of Petroleum Resources (DPR) from revoking the Ororo Marginal Field in OML 95 pending the determination of the substantive suit.

Hassan granted the order of interim injunction against the respondents following a May 19 motion ex parte filed by Owena.

He ordered the parties to maintain status quo in relation to the revocation pending the determination of the Motion on Notice and adjourned till tomorrow June 10 for hearing.

The Ororo field, discovered in 1986, is located within OML 95 in shallow waters with depths ranging between 23ft and 27 ft offshore Ondo State.

Owena, in suit FHC/L/CS/587/2020 filed through its counsel Kemi Pinheiro, SAN, said the 1st and 2nd respondents “purportedly revoked the Ororo Marginal Field without recourse to the Plaintiff.”

It contended that it would suffer “irreparable damage unless the defendants are restrained.”

Justice Hassan upheld the argument.

“An order of interim injunction of status quo is hereby granted restraining the defendants/respondents from taking any step in respect of the revocation of the Ororo Marginal Field in OML 95 pending the determination of the motion on notice,” the judge held.

The oil firm filed the motion on notice with the minister, DPR and Guarantee Petroleum Company Ltd as first to third respondents.

It sought four reliefs: an interim injunction restraining the first two respondents “from implementing, continuing to implement, enforcing and/or giving effect to the purported revocation of the Ororo Marginal Field within OML 95…

An injunction restraining them from taking any action on or “putting the Ororo Marginal Field within OML95 in the bid basket or conducting any Marginal Field bid round in respect of Ororo Marginal Field…

“An order restraining both respondents from publishing the purported revocation of the Ororo Marginal Field within OML 95 in the official Gazette of the Federal Republic of Nigeria pending the hearing and determination of the Motion on Notice.”

It also sought, among others, an order restraining the respondents from, among others, issuing re-entry permits to the third respondent to deal with the Ororo Marginal Field.

Pinhero added: “This application seeks to ensure that the orders of this Honourable Court are not rendered nugatory or a situation of fait accompli foisted upon the Court pending the hearing and determination of the Motion on Notice.

“Unless restrained by this Honourable Court, the 1st and 2nd Defendants will put the Ororo Marginal Field within OML95 in the bid basket.

“The balance of convenience is in favour of the Applicant who will suffer irreparable damage unless the Defendants are restrained by this honourable court as per the prayers sought in this application pending the hearing and determination of the Motion on Notice.”

According to the motion on notice which will be heard tomorrow, the company is seeking a permanent declaration “that the purported revocation of the Ororo Marginal Field within OML 95 is unlawful, invalid, null and void and of no effect whatsoever having regard to the procedure laid down in the Petroleum Act’’.

“The purported revocation of the Ororo Marginal Field within OML 95 is unlawful, invalid, null and void and of no effect whatsoever, having been made during the pendency of the appeal over the decision of this Honourable Court Coram I.N. Buba in Suit No.FHC/L/CS/1815/14: Owena Oil and Gas Limited v. Hon Minister of Petroleum Resources & Ors.

“It is wrong and constitutes a clear breach of the provisions and intendment of the Farmout Agreement (FA) as well as the Joint Operating Agreement (JOA) duly executed between the Plaintiff and the 3d Defendant for the 3rd Defendant to have re-entered Ororo Marginal Field within OML 95 with the active connivance of the 2nd Defendant and without the concurrence of the plaintiff.

“It is also seeking a declaration that consequent upon the receipt of the plaintiff’s correspondence notifying the 2nd Defendant of the removal of the 3rd Defendant as the operator of Ororo Marginal Field in line with the relevant provision of the JOA, the 1st and 2nd Defendants are under obligation to deliberate upon such letter and or sanction the removal of the 3rd Defendant as operator of the Ororo Marginal Field within OML 95.”

It is further seeking an order setting aside and/or nullifying the revocation by the 1st and 2nd Defendants of the Ororo Marginal Field within OML 95.

Its counsel further added that the firm was seeking other alternative reliefs. They are: “An order setting aside and/or nullifying the revocation of the plaintiff’s 45 percent participating interest in the Ororo Marginal Field within OML 95, same having being done in clear disregard to the procedure laid down under the Petroleum Act and in a manner prejudicial to the interest of the Plaintiff.

“An order setting aside and/or nullifying the revocation of the plaintiff’s 45 percent participating interest in the Ororo Marginal Field within OML 95, same having been made during the pendency of the appeal over the decision of this Honourable Court Coram I.N. Buba J. in Suit No. FHC/L/CS/1815/14: Owena Oil and Gas Limited v. Hon Minister of Petroleum Resources & Ors.

“An order directing the 1st and 2nd Defendants to restore the plaintiff’s participating interest in Ororo Marginal Field within OML 95.”

Owena’s situation is similar to that of nine other oil firms, who on May 27 and June 3 also obtained interim injunctions at the Federal High Court in Lagos against the Federal Government over the revoked oil licenses.

Eight of the firms told the Judge that before the revocation, they had spent “tens of millions of US dollars, in the full expectation that they would continue conducting their operational activities on their fields for the remaining life span of each of the fields”.

“The plaintiffs have made huge investments in their fields with a cumulative value of more than $290,000,000 from 2004 to April 2020 towards the development of their fields,” one of the applicants said.

2020 marginal fields bid rounds open

The DPR, despite the suit by Owena Oil and Gas Limited, announced last Monday that it had commenced marginal fields bid rounds for 2020 17 years after the last auction was conducted.

In a statement of its website, it said 57 fields located on land, swamp and shallow offshore terrains are on offer.

The implementing agency announced that the bid round exercise is open to indigenous companies and investors interested in participating in exploration and production business in Nigeria.

However, the next day, DPR Director Sarki Auwalu clarified that oil fields under litigation were not part of the 57 oil fields offered by the federal government for competitive bid rounds.

Speaking during a media interactive session, Auwalu said the 57 oil fields listed for bidding are small oil fields that major oil companies considered unprofitable and auctioned to indigenous companies under a competitive bidding round.

The bid rounds will last 10 weeks and conducted electronically, according to Auwalu.

Back to the courts

Owena Oil and Gas Limited’s suit resumes tomorrow for hearing of its motion on notice, while two other similar suits at the Federal High Court in Lagos have June 10 and 29 adjournment dates.

Industry watchers will be keen to see how the matter is resolved.