Seven Energy Initiates Legal Proceedings against NPDC over OMLs 4, 38, 41

Ejiofor Alike
Seven Energy Finance Limited with its parent company, Seven Energy International Limited, has announced that it has taken legal steps to protect its rights under the Strategic Alliance Agreement (SAA) between its wholly owned subsidiary, Seven Exploration and Production Limited and Nigerian Petroleum Development Company Limited (NPDC) on Oil Mining Leases (OMLs) 4, 38 and 41 being operated by Seplat Petroleum Development Company Plc.

Seven Energy had announced that it had received notice from NPDC of its intention to terminate the SAA.
But the Chief Executive Officer of Seven International Limited, Mr. Phillip Ihenacho and the Chief Finance Officer; Chris Thomas, said in a statement posted on the company’s website that the company “has since taken legal steps to protect its rights, including under the SAA, by applying for injunctive relief in the Nigerian courts and arbitration in accordance with the dispute resolution process under the SAA.”

“Notwithstanding the pendency of the legal proceedings, Seven Energy and NPDC continue to engage in good faith to resolve the dispute amicably,” the statement added.

Seven Energy had argued that there are no grounds under which the SAA can be terminated, particularly in light of the prolonged force majeure closure of the Forcados oil export terminal, and had threatened to take necessary steps, including legal actions, to defend and enforce its position and to preserve its contractual rights under and in respect of the SAA.

Article 24.1 of the SAA stipulates that NPDC shall be entitled to terminate the agreement if any of the following events occur: (a) Seven Energy’s subsidiary “defaults in the performance of its material obligations set forth in Article 4.1 (a)”; (b) Seven Energy’s subsidiary “defaults in the performance of its obligations as set forth in 4.1 (b) of the Agreement.”; (c) Seven Energy’s subsidiary “assigns its rights and interests under the agreement, without a prior written notice and prior written consent of NPDC.” (d) Seven Energy’s subsidiary company “is adjudged insolvent, bankrupt or to have made restitution to its creditors by a court in Nigeria”; (e) Seven Energy’s subsidiary company “liquidates or terminates its corporate existence” “There is a breach of the subsidiary’s parent agreement”; (g) “It is established and confirmed that Seven Energy’s subsidiary company and Seplat Petroleum are affiliates.”

The SAA signed in October 2010 was the result of a three-year dialogue Seven Energy claimed to have had with NNPC and the Ministry of Petroleum Resources that began in 2008.

The agreement was based on the company’s credentials in gas development.
The three leases contain significant quantities of gas and are close to the Escravos-Lagos pipeline.
Under the terms of the Strategic Alliance Agreement, Seven Energy is required to fund all of NPDC’s 55 per cent cash call obligations for the Seplat/NPDC joint venture on OMLs 4, 38 and 41.
The company’s crude oil lifting entitlement is calculated after accounting for Royalty and Petroleum Profits Tax (PPT).