The Court of Appeal in Abuja has upheld the claim of NorthWest Petroleum & Gas Company Limited over a 69.6% equity stake in Ede Marginal Field, Oil Mining Lease (OML) 67.
In a judgment delivered on Friday, January 24, 2025, the Appeal Court upheld the appeal filed by NorthWest Petroleum against Gab & Nuella Concept Limited and Brinitup Hydrocarbons Limited (first and second respondents) as well as the Minister of Petroleum Resources.
The appeal arose from a ruling by the Federal High Court, Abuja Judicial Division, delivered on August 29, 2022, by Justice Emeka Nwite, which partly dismissed NorthWest Petroleum’s preliminary objection challenging the competence of the case against its equity stake in Ede Marginal Field.
NorthWest Petroleum 69.6% equity stake
Nairametrics exclusively gathered that by a letter dated March 1, 2021, the DPR notified the first and second respondents and others of their winning bids over different equity stakes in Ede Marginal Field, OML 67.
As per the bid guidelines, the first and second respondents were informed that their respective potential equity stakes were subject to the full payment of a signature bonus within 45 days of receiving their notification as potential awardees.
The letter outlined that failure to comply within this period would result in the expiration of their status and participation in the bid round.
Nairametrics gathered that both the first and second respondents failed to pay the full signature bonus within the stipulated 45-day period, only making partial payments.
They requested an extension to complete the payment, but the DPR did not respond to their request.
After the expiration of the 45-day deadline, the Minister of Petroleum Resources withdrew the portion of the Ede Marginal Field proportional to the part payments made by the first and second respondents.
Subsequently, the DPR awarded NorthWest Petroleum a 69.6% equity stake in Ede Marginal Field, which included the equity purportedly carved out from the first and second respondents’ allocation due to their failure to complete the required payments.
Following the award, the DPR directed the awardees to form an incorporated Special Purpose Vehicle (SPV) based on their percentage equity allocation.
However, the first and second respondents rejected the SPV arrangement, arguing that the directive was arbitrary and unlawful.
As a result, they refused to participate in the formation of the SPV.
In response, the Minister of Petroleum Resources issued notices stating that the awards to the first and second respondents would be withdrawn if they failed to comply with the stipulated terms within 60 days.
Gab & Nuella Concept Limited and Brinitup Hydrocarbons Limited maintained, in their court processes seen by Nairametrics, that the allocation of 69.6% to NorthWest Petroleum was arbitrary and unlawful.
Their legal team argued that the Marginal Field Guidelines do not provide for the reduction of a potential awardee’s equity stake.
Developments at the Trial Court
- The companies had approached the Federal High Court, seeking several reliefs, including a declaration that the award of 69.6% of the Ede Marginal Field to NorthWest Petroleum contravened the provisions of the 2020 Marginal Fields Bid Round Guidelines and Sections 73 and 74 of the Petroleum Industry Act.
- They argued that the award was made arbitrarily, capriciously, and in a discriminatory manner, without an open, transparent, and competitive bidding process.
- They also asserted that no proper selection process was conducted before the equity stake was awarded to NorthWest Petroleum.
- Furthermore, they claimed they were not informed about the proposed reduction of their equity stake before the balance was allocated to NorthWest Petroleum.
- Upon receiving the respondents’ originating processes, NorthWest Petroleum’s legal team, led by Mark Mordi, SAN, filed a preliminary objection, arguing that the trial court lacked jurisdiction to entertain the suit.
- They also sought to have an ex-parte interim injunction discharged, contending that the case was statute-barred as it was filed out of time.
- Mordi cited Section 2(a) of the Public Officers Protection Act, which imposes a statutory limitation of three months for initiating legal action against a public officer for acts carried out in the execution of any law.
- On August 29, 2022, the trial court ruled against NorthWest Petroleum’s objection but discharged one of the ex-parte orders that had restrained the formation of the SPV, stating that the SPV had already been incorporated at the time the suit was filed.
- Dissatisfied with the ruling, NorthWest Petroleum appealed to the Court of Appeal, submitting materials it had earlier presented at the trial court, including evidence of its participation in the 2020 bid round and proof of full payment of the signature bonus for its allocated equity stake.
What the Appeal Court Said
Justice Okong Abang of the Appeal Court noted that the appellant relied on Section 2(a) of the Public Officers Protection Act, which stipulates that suits filed against public officers beyond the prescribed three-month period are statute-barred, and courts must decline jurisdiction.
The first and second respondents argued that when a suit discloses evidence of illegality and abuse of power, public officers lose the protection of the Public Officers Protection Act, allowing legal action beyond the three-month window.
However, Abang held that when a suit is filed outside the prescribed three-month period, it remains statute-barred, and the court must decline jurisdiction.
“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,” he added.
Abang further stated that the appellant presented material evidence in its affidavit confirming its participation in the bid round and full payment of the signature bonus for its allocated equity stake.
“Incidentally, the first and second respondents did not deny this fact in their counter-affidavit opposing the appellant’s preliminary objection,” he noted.
He criticized the trial court for failing to consider the appellant’s material submissions, particularly regarding its participation in the bidding process, which was crucial to determining whether the award was illegal.
Abang concluded that the allegations of illegality raised by the first and second respondents were merely a “sham”.
He also found that the trial court’s failure to consider the appellant’s evidence amounted to a denial of fair hearing, leading to 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.
“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,” Abang said.
The Appeal Court subsequently declared the suit against NorthWest Petroleum “statute-barred” and struck it out for being incompetent.
It also discharged the ex-parte order and interim injunction issued by the trial court, stating that they were granted in a suit that lacked jurisdiction due to its statute-barred status.
More insights
- Given that oil and gas is Nigeria’s primary revenue source, bid rounds for marginal oil fields often attract regulatory scrutiny and legal disputes.
- In April, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) announced the launch of a new bid round for marginal oil fields in Nigeria in 2024, covering 12 oil fields and five fields from the postponed 2022 bid round.
- The NUPRC projected that the bid round could generate revenue in the billions of dollars, though the exact figure remained uncertain.
- Due to regulatory requirements, the allocation of marginal fields frequently leads to litigation, mediation, and arbitration.
What this means
- The case highlights the legal complexities surrounding marginal oil fields and the role of courts in resolving disputes.
- For instance, a similar litigation is ongoing between First Bank of Nigeria and General Hydrocarbons Limited over an alleged loan-related dispute concerning an Oil Mining Lease (OML).
- The Public Officers Protection Act (POPA) shields public officers from unnecessary litigation, ensuring they can execute duties in the nation’s economic interest unless there are proven grounds of criminality.