Lekoil Withdraws Suit Against Nigerian Petroleum Minister

SEATTLE (Oil Monster): Nigeria’s upstream regulatory hiccups continue to take toll on planned offshore exploration and production schedules as some private investors are stuck with their work programs for lack of clarity on key upstream mergers and acquisition procedures.

Nigeria and West Africa focused oil and gas exploration and development company Lekoil is one of the private upstream players whose offshore investment plan in the oil an gas rich country has been put on hold for nearly three years as government agencies keep delaying critical approvals needed to move the search for hydrocarbon resources in the country’s deep and ultra deep waters.

Lekoil said on Tuesday, it has “decided to withdraw legal action” against the minister but that it “will also continue engagements with the regulator and Optimum Petroleum Development Company Limited, the operator of OPL 310, to conclude agreements and resolve all outstanding issues.”

The dispute between Lekoil and the Minister for Petroleum Resources dates back to 2016 when the oil and gas development company, submitted an application seeking approval of the acquisition of Afren Investment Oil and Gas Nigeria Ltd, through its wholly owned subsidiary Lekoil 310 Ltd.

But nearly a year after applying to have the consent for the acquisition given, the Ministry of Petroleum Resources had not responded. And so in 2017, the then acting President of the Federal Republic of Nigeria, Prof Yemi Osinbajo, issued an Executive Order saying, “Where the relevant agency or official fails to communicate approval or rejection of an application within the time stipulated in the published list, all applications for business registrations, certification, waivers, licenses or permits not concluded within the stipulated timeline shall be deemed approved and granted.”

“We have the consent for one our interests in OPL 310 which has been pending for three years and this is an asset we have that spent over $100 million of our money and the other entity we bought has spent $100 million so between us there is over $200 million spent but still there is no regulatory approvals so we can’t move forward,” said Lekan Akinyanmi, CEO Lekoil in earlier interview with Nigerian media.

However, the High Court in Nigeria had previously ruled that the Acting President’s Executive Order “could not supersede the powers of the Minister to grant such Consent.”

According to Justice Muslim S. Hassan, “the Executive Order was signed in 2017, while Lekoil's application for the Consent was made in 2016 and so could not be applied retroactively.”

Lekoil said the Judge insisted, “due process for the Consent application would have to be followed prior to any Consent being deemed.”

A dissatisfied Lekoil vowed to challenge the court ruling because the company said on March 28 it “believes it has strong grounds to appeal against this judgment by the Federal High Court and intends to file a notice of appeal, and a stay of execution of this judgment with the Court of Appeal within a week.”

“The company will take all necessary action to preserve its right to the 22.86 per cent interest in OPL 310,” it said. Lekoil has since retracted from this position.

The company has been seeking an extension of the OPL 310 permit beyond February 2019 to enable Lekoil “recover over three years lost due to regulatory delays beyond the company’s control.”

But Lekoil CEO Akinyanmi sees the hiccup in obtaining the consent for the acquisition of Afren stake as a wider systemic problem within the Ministry of Petroleum Resources that can best be addressed through change reforming of existing regulatory procedures.

“We need to have a system that allows these things to move quickly because to the extent we do that then you can bring more money into the system into the country and then everybody benefits,” he said during the recent media interview.

“Right now, we have a very central system, I talk to the guys in government and you will find out that many of them are sometimes overwhelmed. Everybody all over the country comes to that central system and the people there are dealing with so many things,” he observed.

The company’s change of heart came after the ministry sent a letter to Lekoil pegging the extension of the OPL310 permit on the withdrawal of any pending suits against the Minister for Petroleum Resources.

“The letter notes that the OPL 310 licence expired on February 10, 2019 and ownership of OPL 310 has accordingly reverted to the government in line with Petroleum Act,” said Lekoil on Tuesday. It confirmed the government’s letter “sets out that the re-award will not be considered by the Honorable Minister of Petroleum Resources until the suit filed by Lekoil is withdrawn.”

“Failure by Lekoil and others to withdraw the suit within 30  days of the letter, which was dated May 8, 2019, but received by Lekoil on May 13, 2019, forecloses any consideration of re-award to Optimum Petroleum Development Limited, Lekoil and their affiliates or subsidiaries,” the statement said.

But the Lekoil CEO captures the Nigerian petroleum industry problem well when he says, “The single biggest challenge we have faced as a company has not been technical, it has not been money, it has been regulatory approvals.”

Courtesy: www.oedigital.com