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General Hydrocarbons Limited (GHL) has disputed First Bank of Nigeria’s (FBN) claim of a $225 million loan, stating that the relationship between the two companies is a project finance agreement, not a normal commercial loan.

According to a press statement released by GHL, the company was approached by FBN to finance the exploration, development, and production of Oil Mining Lease (OML) 120, with FBN agreeing to share profits 50:50 and pay GHL the cost of finance. However, GHL alleges that FBN failed to meet its commitment to fully finance the project, resulting in losses of $47 million.

GHL also claims that FBN’s $225 million loan claim is premature, as the project has not yet achieved commercial production and is still covered by a moratorium. The company has initiated arbitration proceedings and is seeking over $1 billion in damages.

In response, FBN has obtained temporary Mareva measures, which GHL claims are supported by “wild, unfounded, and unproven allegations of dissipation of assets.” However, GHL maintains that all payments were made directly by FBN to third-party vendors after due diligence and verification.

The dispute between GHL and FBN has significant implications for the oil and gas industry, highlighting the complexities of project finance agreements and the need for careful consideration of contractual obligations.

As the arbitration proceedings continue, GHL remains open to mediation and resolution, while emphasizing its commitment to fighting for justice and damages. The outcome of this dispute will be closely watched by industry stakeholders and will likely have far-reaching consequences for project finance agreements in Nigeria.

Here is the full text of the press release:

GHL vs FBN: The Facts, The Half-Truths and The Fiction

1. Is GHL’s liability to First Bank a loan? The simple answer is NO, as it is not a normal commercial loan: it is a Project Finance relationship.

Here is how:

2. GHL is the awardee and licenced operator of OML 120. FBN approached GHL to finance the exploration, development and production of OML 120 and share profit 50:50, while paying FBN cost of finance. The FBN 50% share is dedicated to paydown its non-performing loan of $600million (discounted from $718million from AMCON’s Eligible Bank Asset) in
order to resolve FBN’s solvency issues.

In doing that, GHL guaranteed FBN’s liability to AMCON, through a
Tripartite Agreement between GHL, FBN and AMCON.

3. The result of the Tripartite Agreement was that FBN became immediately profitable and moved from a loss of N302Billion to a profit of N151Bn for 2021 FYE. However, in return, it has failed to meet its commitment under the Tripartite Agreement to fully finance and make the payments required for the optimal exploration and development of OML 120 as agreed in the Tripartite Agreement, resulting in losses in day rates and downtimes of $47million, which has snowballed into the current impasse as FBN has failed to make further required payments for the drilling and exploration of OML 120. Essentially, FBN failed to fulfil its condition precedent to profitability in failing to finance OML 120 as agreed, leaving its financial statements open to challenge. Meanwhile the FBN’s claim of $225Million loan is not due as it is still covered by moratorium, given that the project has not achieved commercial production. So, at best FBN’s claim is premature.

4. GHL has now gone for Arbitration which is ongoing and FBN has gone
to court with a series of Exparte (temporary) Mareva measures, the first of which has been vacated and the case is now being heard on the merit, whilst the second temporary Mareva is pending at the Federal High Court in Port-Harcourt, Rivers State, both supported by” wild, unfounded and unproven allegations of dissipation of assets.
”
5. Did GHL dissipate any asset? The answer is no as all payments were made by First Bank DIRECTLY to 3rd parties after due diligence an dverifications by FBN, and the 3rd parties are mainly global, world class, reputable companies with strict compliance regimes.

6. GHL is filing a claim of over $1Billion in various courts, while FBN is claiming $225million debt which it never complied with in line with the agreements.
GHL will continue to fight for justice and damages whilst it remains open for mediation and resolution.