Appeal Court Validates NorthWest Petroleum’s 69.6% Equity Stake in Ede Marginal Field
The Court of Appeal in Abuja has upheld NorthWest Petroleum & Gas Company Limited’s claim to a 69.6% equity stake in the Ede Marginal Field, Oil Mining Lease (OML) 67.
In a judgment delivered on Friday, January 24, the Court of Appeal ruled in favor of NorthWest Petroleum’s appeal against Gab & Nuella Concept Limited, Brinitup Hydrocarbons Limited, and the Minister of Petroleum Resources.
This appeal stemmed from a Federal High Court ruling issued on August 29, 2022, by Justice Emeka Nwite, which had partially dismissed NorthWest Petroleum’s preliminary objection regarding the legitimacy of the case concerning its equity interest in the Ede Marginal Field.
The dispute originated from a March 1, 2021 letter by the Department of Petroleum Resources (DPR), which notified the first and second respondents, among others, of their successful bids for various equity stakes in Ede Marginal Field, OML 67.
As per the bid guidelines, the respondents were required to fully pay the signature bonus within 45 days to secure their equity stakes.
Failure to meet this deadline would lead to the expiration of their status as potential awardees.
Both respondents, however, only made partial payments and subsequently requested an extension, which the DPR did not address.
After the 45-day period expired, the Minister of Petroleum Resources withdrew the equity portions allocated to the first and second respondents based on their incomplete payments.
NorthWest Petroleum was then awarded a 69.6% equity stake in the field, including the portions previously allocated to the first and second respondents.
Following the award, the DPR instructed the awardees to create an incorporated Special Purpose Vehicle (SPV) based on their respective equity stakes.
The first and second respondents opposed this arrangement, deeming it arbitrary and unlawful, and refused to participate in the SPV’s formation.
The Minister of Petroleum Resources subsequently warned that the awards to the respondents would be revoked if they failed to comply with the terms within 60 days.
The respondents challenged the allocation of 69.6% to NorthWest Petroleum, claiming it was unlawful and arbitrary.
They argued that the Marginal Field Guidelines did not allow for a reduction of an awardee’s equity stake and that no proper selection process was followed.
They also contended that they were not notified of the reduction in their equity before the redistribution occurred.
NorthWest Petroleum, represented by Mark Mordi, SAN, responded by filing a preliminary objection in the Federal High Court, arguing that the court lacked jurisdiction to hear the case, citing the statute of limitations under the Public Officers Protection Act.
The trial court ruled against NorthWest Petroleum’s objection but lifted an ex-parte injunction that had prevented the formation of the SPV, noting that the SPV had already been incorporated by the time the suit was filed.
Dissatisfied, NorthWest Petroleum appealed the decision, presenting evidence of its participation in the 2020 bid round and its full payment of the signature bonus for its awarded equity stake.
Justice Okong Abang of the Appeal Court upheld the appeal, emphasizing that according to Section 2(a) of the Public Officers Protection Act, suits filed beyond the prescribed three-month period against public officers are statute-barred, and the court must decline jurisdiction.
The first and second respondents had argued that the protection of public officers under the Act does not apply when there is evidence of illegality and abuse of power.
However, the Court of Appeal concluded that the suit, having been filed outside the prescribed time frame, was statute-barred, and the court therefore lacked jurisdiction to hear the case.
“No reason was offered as to why the suit was not filed within the prescribed three-month period,” Abang said.
“The trial court used a faulty premise to conclude that the first and second respondents’ suit disclosed illegality and abuse of power.”
Abang further noted that the appellant provided substantial evidence in its affidavit, verifying its involvement in the bid round and the complete payment of the signature bonus for the equity stake it was allocated.
“Incidentally, the first and second respondents did not deny this fact in their counter-affidavit opposing the appellant’s preliminary objection,” he added.
He reprimanded the trial court for overlooking the appellant’s key evidence, especially concerning its participation in the bidding process, which was essential to evaluating the legality of the award.
Abang concluded that the claims of illegality made by the first and second respondents were baseless.
He further determined that the trial court’s disregard for the appellant’s evidence constituted a denial of fair hearing, resulting in a miscarriage of justice.
“The first and second respondents did not dispute that their equity stake in the marginal field was subject to full payment of the signature bonus,” Abang said
“They have not disputed the fact that they failed to pay the signature bonus in full.
“In my view, the Minister of Petroleum Resources’ decision to reduce their potential equity stake due to delayed payment and reallocate it to another party that had fulfilled the payment requirements and even commenced production cannot be considered an act of bad faith or abuse of office,” he added.
The Court of Appeal later ruled that the suit against NorthWest Petroleum was statute-barred and dismissed it as incompetent.
The court also annulled the ex-parte order and interim injunction previously issued by the trial court, asserting that they were granted in a case that lacked jurisdiction due to its statute-barred nature.
As oil and gas remain Nigeria’s primary revenue source, bid rounds for marginal oil fields are often subject to regulatory scrutiny and legal challenges.
In April, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) announced the initiation of a new bid round for marginal oil fields in 2024, encompassing 12 oil fields, as well as five fields carried over from the postponed 2022 bid round.
The NUPRC projected that the upcoming bid round could generate billions of dollars in revenue, although the exact amount remained uncertain.
Because of regulatory requirements, the allocation of marginal fields often triggers litigation, mediation, and arbitration.
