An oil and gas consultancy firm, Trobell International Limited has given an account of how it helped the federal government recover over $55 billion in unpaid royalties from international oil companies operating in Nigeria.
In a statement by the firm’s managing director, Mr Thomas Sede, the company said it crossed several hurdles in its attempt to help the government recoup what is due to it from profit made by the IOCs under Production Sharing Contracts.
The company was engaged by the federal government as lead consultant to recover the excess of government’s share from the profits made by those companies.
The Office of the Attorney General of the Federation which engaged the firm in 2018 suspended its work last month.
But before the suspension, according to Mr Sede, the firm has helped the government raked in over $55 billion following out of court settlement with some of the oil firms which initially rushed to court to stop the recovery effort.
The demand for the recovery charges of 5% of the recovered sum, according to the managing director, was in line with the terms of engagement and the standards in such process.
The firm said it was the first to bring the attention of the government to possibility of making the recovery at a time the government was struggling with balancing up its finances following the economic crises witnessed by the early years of the Buhari administration.
“It was out of patriotism that Trobell on 19th January 2017 when Nigeria was in recession and knowing fully well that the contracting oil companies which signed the Production Sharing Contracts (PSCs) are owing Nigeria these colossal sums of money from profit oil, wrote a proposal to the then Honourable Minister of Finance to be appointed a lead consultant to recover the money from the International Oil Companies (IOCs).”
“It is important to note that it was at the time Nigeria went about borrowing through the issuance of Bonds and Treasury Bills for minimal amount when compared to the large sums of money the country was being owed by these international oil companies.
“When there was no response exactly one year after Trobell’s proposal to the Former Minister of Finance, Trobell again submitted the same proposal on January 19, 2018 to the Honourable Attorney-General of the Federation (HAGF).”
Around this time, three Niger Delta states of Rivers, Akwa Ibom and Bayelsa had also sued the federal government seeking that the government be mandated to initiate process of recovering the said monies from the IOCs in order to have their own shares.
Mr Sede said when the firm was finally engaged it moved to end the legal tussles before taking further steps for recoveries.
“Trobell’s mandate was to identify the PSCs contracting companies that are affected by the non-application of the Production Sharing Act; Section 16 (1) and determine the amount owed by each company.”
To accomplish the task, he said, Trobell engaged “several Senior Advocates of Nigeria (SANs) and one of the best accounting firms in Nigeria. Beside the Petroleum experts nominated to work with Trobell by the plaintiff states, Trobell also engaged its own Petroleum experts”.
Some of the tasks undertaken, according to Mr Sede, include obtaining relevant documents from NNPC, FIRS, Nigerian Customs and other sources (PSC Agreements, Tax Returns etc.), analysis of Crude Oil Price Data (1998-2018), Crude Oil lifting data by PSC Parties over the period of each Oil Mining Lease (OML) production, United States of America Inflation rates (1998-2018) to adjust US$20 to Real Terms – conversion of US$20 of 1998 to US$20 Real Terms over the period.
Addititional tasks undertaken by Trobell include development of Financial Model for the computation of the Additional Revenue & approval of same by the Body and the HAGF, computation of revised Profit Oil distribution between OML operators and NNPC/FGN on switch of profit-sharing ratios, compilation and Presentation of a comprehensive report to the office of the HAGF showing a detailed summary of amounts due from the various OMLs under the various PSCs
With the approval of the minister of Justice, the firm also sent letters of demand for the amounts computed against the various OMLs were sent out to the various operators and convened a meeting between the body of consultantso, the OML Operators (IOCs) and the Federal Ministry of Justice.
The meeting, according to Mr Sede, discussed the basis of the demand notices and how the outstanding amounts of Additional Revenue accruing to the Federation were calculated for each OML, the terms of the mechanism for recovery and modalities for negotiation and for making enquiries and getting responses in respect of the subject matter.
Full text below:
RECOVERY OF THE $55B FROM IOCs: WHOSE SIDE ARE YOU ON – TROBELL
Our attention has been drawn to certain information circulating in the newsprint and social media, with reference to a publication by The Cable News on Wednesday the 20th of May 2020 titled: “EXCLUSIVE: Malami’s debt collectors’ demand $1.5bn over terminated contract.” Ordinarily, we would have refrained from responding to it, but it is pertinent as it were, to set the records straight in an accurate and responsible manner so as to debunk the many imperfect representations created by the cable news. Trobell International Nigeria Limited (Trobell) is a wholly owned Nigerian company with principal focus on delivering professional support services in the upstream, midstream and the downstream subsectors of the Oil & Gas Industry in Nigeria. The company which was duly incorporated in Nigeria under the Companies Act of 1968 on June 17, 1987 has vast experience in the oil and gas sector in Nigeria. It is pertinent to debunk the assertion of Cable News that Trobell is a little-known company in Nigeria. With all humility, Trobell is the leading company in its area of operation in the oil and gas industry in Nigeria.
It was out of patriotism that Trobell on 19TH January 2017 when Nigeria was in recession and knowing fully well that the contracting oil companies which signed the Production Sharing Contracts (PSCs) are owing Nigeria these colossal sums of money from profit oil, wrote a proposal to the then Honourable Minister of Finance to be appointed a lead consultant to recover the money from the International Oil Companies (IOCs).
The agencies that were responsible to have recovered this money from the International Oil Companies for reasons best known to them never applied the terms of the governing law to the contracts to collect that money. It is pertinent to highlight that the production sharing contracts were both subject and subjected to the Nigeria Laws by all the contracting parties. A clause in the contracts stated that “the governing laws shall be the laws of the Federal Republic of Nigeria”. In effect, the law on the subject is the Production Sharing Act; then a decree effective from 1993. There are very important clauses under this law in Section 16 (1). Section 16 (1) which is in focus here stipulates that “if at any time the price of crude oil exceeds $20 per barrel in real terms, the share of the Federal Government of Nigeria in the additional revenue shall be reviewed to make it more economically advantageous to Nigeria. Then the sharing ratios were 80:20 to about 5 oil companies and 70:30 to one of them. Note: the higher percentages in the ratios are to the oil companies while the lower percentages are to the Federal Government of Nigeria.
The principal motivation for Trobell in this, is the fact that Mr. President has achieved remarkable successes in his quest to make Nigeria a better place for all Nigerians and foreign nationals who live and do business in Nigeria. The tenacity of the President Muhammadu Buhari to develop Nigeria created an incredible prospect for Trobell to contribute its quota in serving our Nation Nigeria. We believed that with a person of such impeccable integrity and the will power to cater for the common man on the street at the helm of affairs of Nigeria, it was a great time to render our supreme support toward our nation building.
The proposal written by Trobell to the then Honourable Minister of Finance seeking to be appointed as a consultant to recover the money was on this premise. It is important to note that it was at the time Nigeria went about borrowing through the issuance of Bonds and Treasury Bills for minimal amount when compared to the large sums of money the country was being owed by these international oil companies.
When there was no response exactly one year after Trobell’s proposal to the Former Minister of Finance, Trobell again submitted the same proposal on January 19, 2018 to the Honourable Attorney-General of the Federation (HAGF).
Three Niger Delta states namely: Rivers, Akwa Ibom and Bayelsa also took the Federal Government to Court for the Federal Government to wake up and recover the money to enable them get their own share of the funds.
Terms of settlement between the plaintiff states and the Federal Government of Nigeria were written and signed by the HAGF on behalf of the Federal Government of Nigeria. The terms of settlement included the engagement of a lead consultant to recover the money with each of the plaintiff states having a nominee who is an expert in the Petroleum industry to work with the lead consultant.
Consequently, on the 17th of October, 2018, the Supreme Court of Nigeria in its original jurisdiction gave judgment and ordered that effect should be given to the provision of Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act, Cap D3, Laws of the Federation, 2004 and the Order of the Supreme Court is quoted hereunder: “…this court, in exercise of its original jurisdiction can order that the terms of settlement by parties be made the judgment of this court. Accordingly, I hereby order that the terms of settlement entered into and duly signed by both the Plaintiffs and Defendant and their counsel be and is hereby made the judgment of this Court in respect of the dispute between the parties to this suit. The said terms of settlement shall be and remain the judgment of this court.”A copy of the Supreme court judgement can be made available on request.
It was after the terms of settlement between the plaintiff states and the Federal Government of Nigeria which included the engagement of a lead consultant to recover the asset were written and signed by all stakeholders that Trobell was appointed a lead consultant to recover the additional revenue due to the Federal Government of Nigeria from the Production Sharing Contracts. Trobell being appointed to lead the body set up for this complex assignment worked closely with the Asset Recovery and Management Unit (ARMU) of the Federal Ministry of Justice.Contrary to some misleading media publications that Trobell is not a debt recovery agent, it is equally important to state unequivocally that this is not a debt recovery contract as it is made to appear but a consultancy in a very complex matter which was formerly brought to the attention of the Federal Government by Trobell. Trobell’s mandate was to identify the PSCs contracting companies that are affected by the non-application of the Production Sharing Act; Section 16 (1) and determine the amount owed by each company. We wish to clarify that in executing this work, Trobell on its own engaged several Senior Advocates of Nigeria (SANs) and one of the best accounting firms in Nigeria. Beside the Petroleum experts nominated to work with Trobell by the plaintiff states, Trobell also engaged its own Petroleum experts.
Since the inauguration of the ‘Body’ on 7th November, 2018 and up to the time we received a notification that the Federal Government wishes to discontinue the exercise in a letter date 30th April 2020, the ‘Body’ had worked assiduously towards executing the mandate and we have effectively performed and delivered the following tasks:i. Obtaining relevant documents from NNPC, FIRS, Nigerian Customs and other sources (PSC Agreements, Tax Returns etc.)ii. Crude Oil Price Data (1998-2018)iii. Crude Oil lifting data by PSC Parties over the period of each Oil Mining Lease (OML) productioniv. United States of America Inflation rates (1998-2018) to adjust US$20 to Real Terms – conversion of US$20 of 1998 to US$20 Real Terms over the periodv. Development of Financial Model for the computation of the Additional Revenue & approval of same by the Body and the HAGFvi. Computation of revised Profit Oil distribution between OML operators and NNPC/FGN on switch of profit-sharing ratiosvii. Compilation and Presentation of a comprehensive report to the office of the HAGF showing a detailed summary of amounts due from the various OMLs under the various PSCsviii. With the approval of the HAGF, letters of demand for the amounts computed against the various OMLs were sent out to the various operatorsix. Convening of meeting between the ‘Body’, the OML Operators (IOCs) and the Federal Ministry of Justice at Transcorp Hilton Hotel Abuja to discuss the basis of the demand notices and how the outstanding amounts of Additional Revenue accruing to the Federation were calculated for each OML, the terms of the mechanism for recovery and modalities for negotiation and for making enquiries and getting responses in respect of the subject matter. This meeting was chaired by the Hon. Attorney General of the Federation.”We wish to mention that the derived sum owed the Federal Government of Nigeria by the PSCs contractors which was computed from inception to December 31, 2018 is $55,871,219,798.00 (Fifty Five Billion Eight Hundred and Seventy One Million Two Hundred and Nineteen Thousand Seven Hundred and Ninety Eight US Dollars only). This excludes the additional computation from January 2019 to October 2019 before the Act was Amended on 4th November 2019.There are also speculations in the media that appear to question the fee Trobell will be paid. The better concerns should have been whether the fees agreed with Trobell by the Federal Government of Nigeria is consistent with the country’s recovery standard. Besides, the 5% of the amount recoverable is a little fraction when compared with the 95% due to the Federal Government of Nigeria. We are talking about recovery of over $55b unpaid arrears from crude oil producing companies and the legal steps taken to recover these sums. What appears apparent from the imbroglio was the fact that such Nigerian revenue, assets and resources were left at the mercy of winds and tides with little or no efforts in the past to recover the huge amount.
Trobell constituted its own team of experts in conjunction with the nominees of the plaintiffs states and led the combined team that calculated and worked out the amounts being owed Nigeria by the different contracting oil companies from the dates of production commencement by the different oil companies. The Trobbell team underwent arduous task of computing the sums being owed by the companies spanning over the number of years production has been going on at all the production sites covered by the contracts. Thereafter, upon the approval of the Attorney General of the Federation and Minister of Justice; the Chairman/CEO of Trobell on 14th January 2019 before the presidential election in Nigeria issued demand letters to the various IOCs advising them of the amount they owed the Federal Government of Nigeria while also demanding that they make arrangement to pay the stipulated sums. Then all the IOCs that received the letters, ran to court to file cases against NNPC, Trobell and the office of the Honourable Attorney-General of the Federation. Trobell at its own expense engaged the services of several Senior Advocates of Nigeria (SANs) on the various cases filed by these companies both in Lagos and in Abuja.
It was after the re-election of Mr. President that the oil companies being represented by their legal teams during the subsequent hearings of the cases succumbed to amicable settlement of the matter.
In view of the circumstance leading to Federal Government’s decision to suspend the recovery process at the stage we are due to overriding national interest, we therefore demand payment of our agreed remuneration of 5% of additional revenue computed and recoverable of $55,871,219,798.00 (Fifty Five Billion Eight Hundred and Seventy One Million Two Hundred and Nineteen Thousand Seven Hundred and Ninety Eight US Dollars only) less 50% rebate. i.e. (50% of 5%). Which amounts to $1,396,780,494.95 (One billion three hundred and ninety-six million seven hundred and eighty thousand four hundred and ninety four US dollars ninety five cent only. VAT exclusive. When VAT of $104,758,537.12 (One Hundred and four million seven hundred and fifty eight thousand five hundred and thirty seven US dollars twelve cents only) at 7.5% is added, the total comes to $1,501,539,032.07 (One billion five hundred and one million five hundred and thirty nine thousand thirty two US dollars and seven cents only)
It is important to note also that as at now, neither Trobell nor any member of the team constituted has contemplated to take or taken the Federal Government of Nigeria to arbitration with regards to this matter.
Signed
Mr. Thomas Sede,
Managing Director,
Trobell International Limited.
