A British engineering and project management firm, Process and Industrial Developments limited (P&ID), has dragged the Federal Government of Nigeria before a United States District court in Colombia to enforce an arbitral award of $8.9 billion against the latter.
In 2013, a three-man arbitration panel, constituted under the rules of the Arbitration Act 1996 (England and Wales) and the Nigerian Arbitration and Conciliation Act (CAP A18 LFN 2004), awarded $6.6 billion in favour of P&ID. That award has since attracted an additional $2.3 billion in accumulated interest at 7 per cent rate per annum over more than five years it remained unsettled.
According to the suit, P&ID is praying the court to make the Nigerian Government to pay the said sum, which was awarded in an earlier court ruling after the government failed to fulfill its end of an agreement reached in 2010. The Ministry of Petroleum Resources and P&ID had entered into a 20 years agreement to “help Nigeria harness its abundant natural gas reserves to solve the growing electricity crisis”.
Details of the Agreement
P&ID had agreed to build necessary facilities to help refine Nigeria’s associated natural gas or wet gas into non-associated natural gas or lean, which would then be used to power the national electric grid in the country.
The agreement states that in refining the wet gas into lean gas, it was to strip the wet gas of heavy hydrocarbons known as Natural Gas Liquids, which makes wet gas unsuitable for electricity generation. P&ID would be permitted to retain the stripped NGLs as its compensation, which it would sell to get its own income from the project.
According to P&ID, it was agreed that while it built the necessary facilities, Nigeria would supply it with 400 million standard cubic feet of wet gas per day over a period of 20 years.
Why the project failed
P&ID explained that the project collapsed because Nigeria failed to supply them with the agreed daily quantity of wet gas and complete the construction of necessary infrastructure to transport the wet gas to their operation site in Calabar.
“In particular, Nigeria never completed the Adanga Pipeline, which was intended to carry wet gas to the Calabar site where P&ID was to build the gas processing facilities.”