A debt owed by Shell Plc and seven Nigerian banks to a domestic oil producer in the West African nation in connection with an asset sale in 2015 has ballooned to about $2.6 billion, according to people familiar with the matter.
Aiteo Eastern E&P Co. bought a pipeline and operating stake in one of the country’s most prized onshore oil blocks eight years ago for $2.4 billion. Zenith Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc and other local lenders lent the company $1.5 billion to support the acquisition, while Shell, the permit seller, provided $504 million in financing
The parties have been locked in legal litigation since late 2019, when creditors notified Aiteo that it was in default.
The lenders’ position is that Aiteo’s outstanding debt has risen to about $2.6 billion once interest, fees and penalties are included, said the people, who asked not to be identified because the matter is of litigation and arbitration, and discussions between the parties are open. confidential The figure stood at $1.7 billion at the end of 2021 and $910 million a year earlier, according to creditors’ filings in court and arbitration filings.
In a 2019 court filing, Aiteo said it had already repaid $1.2 billion and denied being in arrears. The company did not respond to a request for comment. Shell and the other lenders declined to comment or did not respond to emailed questions.
Daily production from the block in southern Bayelsa state was 43,000 barrels of oil equivalent when the deal was concluded, Shell said in 2015. Aiteo, owned by Nigerian tycoon Benedict Peters, has struggled to secure upgrades planned production.
Production stopped completely in February last year and only resumed in May, the people said. Financial institutions are working to finalize a new repayment schedule with the company, they said.
Those loans “represent significant credits on the books” of the exposed organizations, Lagos-based Africa Finance Corp., which administers the financial arrangement between Aiteo and the banks, said in written evidence to an English court last year past “A loan default would be a very serious matter.”
While energy giants such as Shell and Chevron Corp. produce most of Nigeria’s oil, international companies have been offloading onshore assets to local players for more than a decade, a trajectory that will accelerate in the coming years. Aiteo’s multibillion-dollar buyout of a block from a consortium made up of Shell, TotalEnergies SE and Eni SpA remains the biggest such divestment to date.
Court battles
Told he was in default in October 2019, Aiteo responded by obtaining an injunction from a Nigerian federal court preventing his creditors from collecting the demanded debt, which then stood at $288 million. The company argued that financiers were forced to restructure its repayment schedule due to unforeseen “force majeure events,” including oil theft and pipeline leaks.
After restarting production, Aiteo plans to transport crude to an export terminal instead of using its pipeline, which has experienced significant disruptions and losses, one of the people said.
The lenders commenced arbitration proceedings against Aiteo in London in December 2020, which are ongoing. Peters’ company has also sued Shell in two other cases in Nigerian courts, blaming the UK-based oil major for the company’s “alleged inability” to “fully pay its alleged debt”.
Aiteo has alleged in court filings that Shell misrepresented the status of the pipeline it sold in the 2015 deal and falsely represented itself as the owner of six oil wells the buyer believed were included in the transaction . Shell says both lawsuits are without merit.
