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Failed Project: British Firm Drags FG Before US Court

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  • Failed Project: British Firm Drags FG Before US Court

An engineering and project management firm based in the British Virgin Islands, Process and Industrial Developments Limited, has approached the United States District Court of Columbia, seeking to enforce a $8.9bn arbitral award against the Federal Government.

According to the papers filed by the British firm before the US court, a copy of which our correspondent obtained on Sunday, the arbitral award against the Federal Government followed a failed power project for which the Federal Government signed a 20-year agreement with the foreign firm in 2010.

The British firm explained that in 2010 it signed a contract with the Ministry of Petroleum Resources to “help Nigeria harness its abundant natural gas reserves to solve the growing electricity crisis” in the country.

It said it was agreed that it (the British firm) would build necessary facilities to help refine Nigeria’s associated natural gas or wet gas into non-associated natural gas or lean, which would then be used to power the national electric grid in the country.

It said that in refining the wet gas into lean gas, it was to strip the wet gas of heavy hydrocarbons known as Natural Gas Liquids, which makes wet gas unsuitable for electricity generation.

P&ID said the agreement was that after refining the wet gas into lean gas, it would be permitted to retain the stripped NGLs as its compensation, which it would sell to get its own income from the project.

According to P&ID, it was agreed that while it built the necessary facilities, Nigeria would supply it with 400 million standard cubic feet of wet gas per day over a period of 20 years.

The British firm said with the contract, it had hoped to make a substantial profit from the sale of millions of metric tons of NGLs over the 20-year term.

It explained that though NGLs – which include ethane, propane and butane – render wet gas unsuitable for electricity generation, they could be marketed independently and profitably.

It said as part of the agreement, the Nigerian government was to “ensure that all necessary pipelines and associated infrastructure were installed and all requisite arrangements with agencies and/or third parties were in place to ensure the supply and delivery of wet gas in accordance with the scope of work set forth in the agreement, so as to facilitate the timely implementation of gas processing as provided for in this agreement.”

P&ID said the electricity project, however, hit the rock as Nigeria not only failed to supply it with the agreed daily quantity of wet gas but also failed to complete the construction of necessary infrastructure to transport the wet gas to P&ID’s operation site in Calabar.

“In particular, Nigeria never completed the Adanga Pipeline, which was intended to carry wet gas to the Calabar site where P&ID was to build the gas processing facilities.

“Nigeria’s failures to comply with these obligations caused the collapse of the project contemplated by the agreement.

“Nigeria abandoned the Adanga Pipeline, ceased its efforts to secure a suitable source of wet gas, and eventually stopped responding to P&ID’s correspondence. Nigeria’s breach ensured that no wet gas was ever delivered to the Calabar site,” P&ID said.

It said it was as a result of the breach that it dragged the Federal Government and the Ministry of Petroleum Resources (then under the watch of Mrs Diezani Alison-Madueke) to an arbitration court in London, as provided for in the contract agreement.

It said the arbitration panel, which comprised a former UK Supreme Court Justice, Leonard, Lord Hoffmann; a former Justice of the Court of Appeal of England and Wales, Sir Anthony Evans, Q.C.; and Nigeria’s former Attorney General of the Federation, Chief Bayo Ojo, on January 31, 2017, entered judgement against Nigeria.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Oil Prices Climb on Renewed Middle East Concerns and Saudi Supply Signals

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As global markets continue to navigate through geopolitical uncertainties, oil prices rose on Monday on renewed concerns in the Middle East and signals from Saudi Arabia regarding its crude supply.

Brent crude oil, against which Nigeria’s oil is priced, surged by 51 cents to $83.47 a barrel while U.S. West Texas Intermediate crude oil rose by 53 cents to $78.64 a barrel.

The recent escalation in tensions between Israel and Hamas has amplified fears of a widening conflict in the key oil-producing region, prompting investors to closely monitor developments.

Talks for a ceasefire in Gaza have been underway, but prospects for a deal appeared slim as Hamas reiterated its demand for an end to the war in exchange for the release of hostages, a demand rejected by Israeli Prime Minister Benjamin Netanyahu.

The uncertainty surrounding the conflict was further exacerbated on Monday when Israel’s military called on Palestinian civilians to evacuate Rafah as part of a ‘limited scope’ operation, sparking concerns of a potential ground assault.

Analysts warned that such developments risk derailing ceasefire negotiations and reigniting geopolitical tensions in the Middle East.

Adding to the bullish sentiment, Saudi Arabia announced an increase in the official selling prices (OSPs) for its crude sold to Asia, Northwest Europe, and the Mediterranean in June.

This move signaled the kingdom’s anticipation of strong demand during the summer months and contributed to the upward pressure on oil prices.

The uptick in prices comes after both Brent and WTI crude futures posted their steepest weekly losses in three months last week, reflecting concerns over weak U.S. jobs data and the timing of a potential Federal Reserve interest rate cut.

However, with most of the long positions in oil cleared last week, analysts suggest that the risks are skewed towards a rebound in prices in the early part of this week, particularly for WTI prices towards the $80 mark.

Meanwhile, in China, the world’s largest crude importer, services activity remained in expansionary territory for the 16th consecutive month, signaling a sustained economic recovery.

Also, U.S. energy companies reduced the number of oil and natural gas rigs operating for the second consecutive week, indicating a potential tightening of supply in the near term.

As global markets continue to navigate through geopolitical uncertainties and supply dynamics, investors remain vigilant, closely monitoring developments in the Middle East and their impact on oil prices.

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Oil Prices Drop Sharply, Marking Steepest Weekly Decline in Three Months

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Amidst concerns over weak U.S. jobs data and the potential timing of a Federal Reserve interest rate cut, oil prices record its sharpest weekly decline in three months.

Brent crude oil, against which Nigerian oil is priced, settled 71 cents lower to close at $82.96 a barrel.

Similarly, U.S. West Texas Intermediate crude oil fell 84 cents, or 1.06% to end the week at $78.11 a barrel.

The primary driver behind this decline was investor apprehension regarding the impact of sustained borrowing costs on the U.S. economy, the world’s foremost oil consumer. These concerns were amplified after the Federal Reserve opted to maintain interest rates at their current levels this week.

Throughout the week, Brent experienced a decline of over 7%, while WTI dropped by 6.8%.

The slowdown in U.S. job growth, revealed in April’s data, coupled with a cooling annual wage gain, intensified expectations among traders for a potential interest rate cut by the U.S. central bank.

Tim Snyder, an economist at Matador Economics, noted that while the economy is experiencing a slight deceleration, the data presents a pathway for the Fed to enact at least one rate cut this year.

The Fed’s decision to keep rates unchanged this week, despite acknowledging elevated inflation levels, has prompted a reassessment of the anticipated timing for potential rate cuts, according to Giovanni Staunovo, an analyst at UBS.

Higher interest rates typically exert downward pressure on economic activity and can dampen oil demand.

Also, U.S. energy companies reduced the number of oil and natural gas rigs for the second consecutive week, reaching the lowest count since January 2022, as reported by Baker Hughes.

The oil and gas rig count fell by eight to 605, with the number of oil rigs dropping by seven to 499, the most significant weekly decline since November 2023.

Meanwhile, geopolitical tensions surrounding the Israel-Hamas conflict have somewhat eased as discussions for a temporary ceasefire progress with international mediators.

Looking ahead, the next meeting of OPEC+ oil producers is scheduled for June 1, where the group may consider extending voluntary oil output cuts beyond June if global oil demand fails to pick up.

In light of these developments, money managers reduced their net long U.S. crude futures and options positions in the week leading up to April 30, according to the U.S. Commodity Futures Trading Commission (CFTC).

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Oil Prices Rebound After Three Days of Losses

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After enduring a three-day decline, oil prices recovered on Thursday, offering a glimmer of hope to investors amid a volatile market landscape.

The rebound was fueled by a combination of factors ranging from geopolitical developments to supply concerns.

Brent crude oil, against which Nigeria oil is priced, surged by 79 cents, or 0.95% to $84.23 a barrel while U.S. West Texas Intermediate (WTI) crude climbed 69 cents, or 0.87% to $79.69 per barrel.

This turnaround came on the heels of a significant downturn that had pushed prices to their lowest levels since mid-March.

The recent slump in oil prices was primarily attributed to a confluence of factors, including the U.S. Federal Reserve’s decision to maintain interest rates and concerns surrounding stubborn inflation, which could potentially dampen economic growth and limit oil demand.

Also, unexpected data from the Energy Information Administration (EIA) revealing a substantial increase in U.S. crude inventories added further pressure on oil prices.

“The updated inventory statistics were probably the most salient price driver over the course of yesterday’s trading session,” said Tamas Varga, an analyst at PVM.

Crude inventories surged by 7.3 million barrels to 460.9 million barrels, significantly exceeding analysts’ expectations and casting a shadow over market sentiment.

However, the tide began to turn as ceasefire talks between Israel and Hamas gained traction, offering a glimmer of hope for stability in the volatile Middle East region.

The prospect of a ceasefire agreement, spearheaded by Egypt, injected optimism into the market, offsetting concerns surrounding geopolitical tensions.

“As the impact of the U.S. crude stock build and the Fed signaling higher-for-longer rates is close to being fully baked in, attention will turn towards the outcome of the Gaza talks,” noted Vandana Hari, founder of Vanda Insights.

The potential for a resolution in the Israel-Hamas conflict provided a ray of hope, contributing to the positive momentum in oil markets.

Despite the optimism surrounding ceasefire talks, tensions in the Middle East remain palpable, with Israeli Prime Minister Benjamin Netanyahu reiterating plans for a military offensive in the southern Gaza city of Rafah.

The precarious geopolitical climate continues to underpin volatility in oil markets, reminding investors of the inherent risks associated with the commodity.

In addition to geopolitical developments, speculation regarding U.S. government buying for strategic reserves added further support to oil prices.

With the U.S. expressing intentions to replenish the Strategic Petroleum Reserve (SPR) at prices below $79 a barrel, market participants closely monitored price movements, anticipating potential intervention to stabilize prices.

“The oil market was supported by speculation that if WTI falls below $79, the U.S. will move to build up its strategic reserves,” highlighted Hiroyuki Kikukawa, president of NS Trading, owned by Nissan Securities.

As oil markets navigate a complex web of geopolitical uncertainties and supply dynamics, the recent rebound underscores the resilience of the commodity in the face of adversity.

While challenges persist, the renewed optimism offers a ray of hope for stability and growth in the oil sector, providing investors with a semblance of confidence amidst a volatile landscape.

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