Oredola Adeola with Bloomberg report
Shell Plc, Zenith Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc, and four other Nigerian banks have revealed that Aiteo Eastern E&P Co. owes them approximately $2.6 billion in relation to a 2015 asset sale which was acquired at $2.7 billion, Bloomberg has reported.
EnergyDay gathered that the debt owed by Aiteo Eastern E&P Co, an indigenous oil company, owned by Nigerian tycoon Benedict Peters, bid for and acquired Shell’s OML29 and Nembe Creek Trunk Line for $2.7 billion, has been a matter of dispute for several years, with previous reports stating that the company owed $1.7 billion in oil loans.
Aiteo’s debt can be traced back to its acquisition which was financed by Shell and the seven Nigerian banks. The debt dispute has resulted in legal action, when the creditors notified Aiteo that it was in default. This however led to a Nigerian court freezing Shell’s account in 2021.
Based on the details of the transaction, Zenith Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc and other local lenders loaned the company $1.5 billion to support the acquisition, while Shell – the seller of the permit – provided $504 million in funding to Aiteo.
The lenders’ position is that Aiteo’s outstanding debt has climbed to about $2.6 billion once interest, fees, and penalties are included, sources told Bloomberg.
According to the report, the figure stood at $1.7 billion at the end of 2021 and $910 million a year earlier, according to statements made by the creditors in court and arbitration filings.
In a 2019 court filing, Aiteo said it had already repaid $1.2 billion and denied being in default.
Aiteo didn’t respond to a request for comment. Shell and the other lenders either declined to comment or didn’t respond to emailed questions.
Daily output from the block in the southern Bayelsa state was 43,000 barrels of oil equivalent when the transaction was concluded, Shell said in 2015.
Africa Finance Corp. which administered the financial agreement between Aiteo and the banks, said in written evidence to an English court last year, that the loans “represent significant credits on the books” of the exposed organizations, adding that “A default under the loans would be a very serious matter.”
Informed that it was in default in October 2019, Aiteo responded by obtaining an injunction from a Nigerian federal court that prevented its creditors from collecting on the debt demanded, which then stood at $288 million.
The oil firm argued that the financiers were obliged to restructure its repayment schedule because of unforeseen “events of force majeure,” including oil theft and pipeline leaks.
has struggled to achieve anticipated production improvements.
Having restarted production, in May 2023, after years of shut-in in February, 2022, due to several factors including pipeline vandalism, Aiteo has been barging crude to an export terminal rather than use its pipeline, which has experienced significant disruptions and losses.
The bankers initiated arbitration proceedings against Aiteo in London in December 2020, which are ongoing.
Peters’ company has also sued Shell in two other cases before Nigerian courts, blaming the UK-headquartered oil major for the firm’s “purported inability” to “fully repay its alleged indebtedness.”
Aiteo has alleged in court filings that Shell misrepresented the condition of the pipeline it sold in the 2015 deal and falsely presented itself as the owner of six oil wells the buyer believed were included in the transaction.
“Shell says the two lawsuits were baseless,” this is according to Bloomberg report.