The Nigerian Government’s $9bn Headache

Welcome to P&ID Facts – dedicated to providing real-time, factual information on the Nigerian Government’s failure to honour its contractual agreement with Process and Industrial Developments (P&ID), an engineering and project management company.

In 2010, P&ID and the Nigerian Government entered into a Gas Supply and Processing Agreement (GSPA). The Nigerians failed to uphold their end of the contract. In August 2012, after several attempts over 2.5 years by P&ID to salvage the agreement, including offers to renegotiate the deal, the company initiated arbitration proceedings. In January 2017, the independent tribunal in London, found that Nigeria was liable for $6.6 billion in damages, which by now has increased to over $9 billion with interest.

This is deeply unfortunate. The P&ID project would have supplied 2,000 megawatts of electricity in a country where tens of millions do not have access to power. Nigerians have suffered at least six nationwide blackouts this year to date. The failure of the government to implement the P&ID project has harmed the prospects of millions.

The current stage in the process is that P&ID is seeking to enforce the award through the U.S. and U.K. courts: meaning that Nigerian assets could be seized to pay the debt.

That is the cost of former and current Nigerian governments refusing to meet contractual commitments and promises; it is the cost of ongoing, and deliberate, attempts to delay and obstruct legal proceedings; it is the cost of refusing to negotiate a reasonable settlement of its debt.

The background of this extraordinary story starts with the founders of P&ID, Brendan Cahill and Michael Quinn. Messrs Cahill and Quinn had over two decades of experience designing and managing projects inside Nigeria: they conceived a new project that would deliver much-needed power generation to millions of Nigerians, and create profitable by-products for sale on the international market.  Under an agreement with Nigeria, P&ID would build a state-of-the-art gas processing plant to refine natural gas (“wet gas”) into “lean gas” that Nigeria would receive free of charge to power its national electric grid.

P&ID would receive no payment for this work: instead, they would own the by-products created by the refining – such as propane, ethane and butane, known as Natural Gas Liquids (NGLs) – and would have the right to sell them on the international markets. This market would be worth billions of dollars over the 20-year lifespan of the contract.

However, Nigeria never supplied the ‘wet gas’ (which was required under the terms of the contract) and so the project stalled and collapsed. P&ID made multiple compromises in an attempt to find a workable solution: but they did not find a willing partner on the other side of the table. In 2012, when it had become clear that the Nigerian government simply would not honour its obligations under the deal, P&ID was forced to go to arbitration to try to resolve the dispute.

In 2016, the panel of independent arbitrators ruled that Nigeria was liable to P&ID, which has led to the current situation. The panel, as well as being independent, comprised extremely experienced arbitrators: Lord Hoffmann (appointed independently by neither party) was a former Law Lord in the U.K. House of Lords and is a current member of the Hong Kong Court of Final Appeal, Sir Anthony Evans (appointed by P&ID) formerly sat in the English Court of Appeal and is now the Chief Justice of the Dubai International Financial Centre Courts, while Chief Bayo Ojo SAN (appointed by Nigeria) had formerly been Attorney General of Nigeria. These eminent jurists ruled unanimously that Nigeria was liable to P&ID.

The P&ID saga is not really a story about a legal process, though: it is a story about missed opportunities. A missed opportunity for the Nigerian government, to deliver infrastructure and expand its revenues; a missed opportunity for the Nigerian people, who would have benefited enormously from increased access to low-cost electrical power; a missed opportunity for P&ID itself, who stood to make billions in profits from selling by-products on the international markets over the 20-year term of the contract; and even a missed opportunity for the global environment – the scourge of a decade of massive gas flaring in Nigeria could have been avoided, saving CO2 emissions and improving air quality.

Sadly, those opportunities have come and gone. The only step remaining is for the current Nigerian administration to accept its legal responsibilities and settle the tribunal award.

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