The P&ID contract was a signed agreement with the Ministry of Petroleum Resources on behalf of the Nigerian government on January 11, 2010 for a gas supply and processing project.
Under the terms of the agreement, P&ID was to build and operate an Accelerated Gas Development project to be located at Adiabo in Odukpani Local Government Area of Cross River State.
The Nigerian government was to source for natural gas from oil mining leases (OMLs) 123 and 67 operated by Addax Petroleum and supply to P&ID to refine into fuel suitable for power generation in the country.
Nigeria was expected to supply an initial volume of about 150 million cubic feet of gas per day. Eventually, it was to be ramped up to about 400 million cubic feet per day during the 20-year period.
The case with Nigeria started when P&ID alleged that after signing the agreement, the Nigerian government reneged on its obligation after negotiations were opened with the Cross River State government for allocation of land for the project.
P&ID said the failure to construct the pipeline system to supply the gas frustrated the construction of the gas project, thereby depriving it of the potential benefits from over 20 years’ worth of gas supplies. It said attempts to settle out-of-court with the Nigerian government failed.
P&ID however in 2012 served the Nigerian government a Request for Arbitration, where Nigeria argued before the tribunal that “the failure of P&ID to acquire the site and build Gas Processing Facilities was a fundamental breach and that no gas could be delivered until this has been done.”
The tribunal ruled that Nigeria’s obligations under Article 6B were not conditional upon P&ID having constructed the gas processing facilities. The arbitral tribunal found that Nigeria had repudiated its obligations under the GSPA, and that P&ID had been entitled to accept the repudiation and claim damages for breach.
According to the Tribunal in 2016, the damage suffered by P&ID was the loss of net income the company would have received if the government kept its side of the contract. It also held that P&ID’s expenditure and income should have been about $6.597 billion if the GSPA was duly performed by government, and the award should be paid together with interest at the rate of 7 per cent from 2013.
The initial award of $6.6 billion as damages in favour of P&ID accumulated to about $8.9 billion, including an additional $2.3 billion in accumulated interest at 7 per cent rate per annum. These figures rose due to Nigeria’s refusal to enter an appeal for over five years.
P&ID then commenced moves to enforce the award by targeting Nigerian assets abroad, thereby forcing Nigerian government to file an appeal against the judgment of the English Court for a stay of execution, apart from other efforts in the courts of the United States of America to protect Nigeria’s interests.
The Office of the Attorney General of the Federation described the award as “clearly unreasonable and manifestly excessive and exorbitant, punitive and unjustifiable.”
Victory came Nigeria government way as it secured a judgement of a British court to suspend an unfavourable ruling over the P&ID mess.
The Attorney-General and Minister of Justice, Abubakar Malami, said in a statement on Friday that the court has granted Nigeria’s application for an extension of time and relief from sanctions due to the exceptional circumstances where the government has uncovered evidence of massive fraud in procuring the award.
With this judgement, the Nigerian Government relying on number of on-going investigations across multiple jurisdictions, including the United Kingdom to build its case would proceed to a full trial of the issues, where government’s substantive application to finally set aside the award would be heard.
