NEW YORK—A U.S. judge on Sept. 3 rejected Exxon Mobil Corp.’s and Royal Dutch Shell Plc’s effort to revive a $1.8 billion arbitration award against Nigeria’s state-run oil company, which stemmed from a dispute over a 1993 contract to extract oil near the African country’s coastline.
U.S. District Judge William Pauley in Manhattan cited public policy and due process considerations in deciding not to enforce the October 2011 award against Nigerian National Petroleum Corp. (NNPC), which was subsequently set aside by courts in Nigeria.
“While this court may have inherent authority to fashion appropriate relief in certain circumstances, exercising that authority to create a $1.8 billion judgment is a bridge too far,” Pauley wrote in a 50-page decision.
The companies said last November that the award had grown to $2.67 billion, including interest.
Exxon spokesman Todd Spitler said the Irving, Texas-based company disagreed with the decision and was evaluating its next steps. Shell and its lawyers did not immediately respond to requests for comment.
“NNPC is very pleased with the decision, and was always confident that there was no basis for a U.S. court to confirm the award,” its lawyer Cecilia Moss said in an interview.
According to court papers, the 1993 contract anticipated that Exxon and Shell affiliates would invest billions of dollars to extract oil from the Erha field, about 60 miles off Nigeria’s coast, and share profits with NNPC.
But the affiliates, Esso Exploration and Production Nigeria Ltd and Shell Nigeria Exploration and Production Co Ltd, accused NNPC of unilaterally “lifting” more oil than was contractually allowed, at the behest of Nigeria’s government, depriving them of billions of dollars of oil.
Pauley said Exxon and Shell still have “multiple appeals pending” in Nigeria, and rejected their argument that it might be difficult to collect there.
Exxon and Shell “executed a contract in Nigeria with another Nigerian corporation containing an arbitration clause requiring any arbitration to be held in Nigeria under Nigerian law, and it then sought to confirm the award in Nigeria,” Pauley wrote. “[They] cannot now reasonably complain that [their] efforts to collect will be frustrated in Nigeria.”
In an Aug. 7 regulatory filing, Exxon said it did not expect the case to materially affect its operations or financial condition.
Recommended Reading
Midstream M&A Adjusts After E&Ps’ Rampant Permian Consolidation
2024-10-18 - Scott Brown, CEO of the Midland Basin’s Canes Midstream, said he believes the Permian Basin still has plenty of runway for growth and development.
Post Oak-backed Quantent Closes Haynesville Deal in North Louisiana
2024-09-09 - Quantent Energy Partners’ initial Haynesville Shale acquisition comes as Post Oak Energy Capital closes an equity commitment for the E&P.
Analyst: Is Jerry Jones Making a Run to Take Comstock Private?
2024-09-20 - After buying more than 13.4 million Comstock shares in August, analysts wonder if Dallas Cowboys owner Jerry Jones might split the tackles and run downhill toward a go-private buyout of the Haynesville Shale gas producer.
Aethon, Murphy Refinance Debt as Fed Slashes Interest Rates
2024-09-20 - The E&Ps expect to issue new notes toward redeeming a combined $1.6 billion of existing debt, while the debt-pricing guide—the Fed funds rate—was cut on Sept. 18 from 5.5% to 5%.
Dividends Declared Sept.16 through Sept. 26
2024-09-27 - Here is a compilation of dividends declared from select upstream, midstream and service and supply companies.