General Hydrocarbons Limited (GHL) has refuted claims by First Bank of Nigeria (FBN) Plc regarding an alleged $225 million debt, describing the allegations as misleading and without merit.
In a statement signed by GHL’s Director of Strategy and Operations, Abdelmuizz Bello, the company criticized recent media reports on the matter, describing the allegations as “befuddling, without merit, and malicious.”
GHL emphasized that it was not indebted to FBN and had acted within the confines of legally binding agreements.
“The allegations of a diversion of the monies advanced to GHL are therefore befuddling and without merit, as payments were made by FBN directly to service providers after vetting and approval by its credit and risk teams,” Bello stated.
He further explained, “At the end of the day, FBN became a conflicted lender, risk manager, and operator at the same time, when it got involved in vetting, approving, and paying all invoices. At the same time, FBN also approved and later appointed a CFO for GHL, taking full responsibility for all financial disbursements.”
Subrogation Agreement and Financial Obligations
According to Bello, GHL entered into a Subrogation Agreement with FBN on May 29, 2021. Under this agreement, FBN was to fund GHL’s exploration and development of OML 120 in exchange for a 50% share of profits from oil proceeds over an eight-year period.
This profit-sharing arrangement, Bello noted, was designed to help FBN settle its own non-performing loans (NPLs) and stabilize the bank’s financial standing. He also clarified that FBN’s claims of debt stemmed from unrelated NPLs extended to Atlantic Energy, a company operating separate oil fields under Strategic Alliance Agreements.
“In its quest to stay afloat, FBN sold the loan at $600 million as an Eligible Banking Asset (EBA), with comfort from GHL. The bank then collected the cash from the Asset Management Corporation of Nigeria (AMCON), using it to rebuild itself without meeting GHL’s needs,” Bello added.
Court Rulings and Allegations of Diversion
Citing a Federal High Court judgment in its favor, GHL disclosed that FBN had been restrained from obstructing the company’s operations or appointing an alternative operator for OML 120. Despite this ruling, FBN allegedly sought and obtained a Mareva injunction from another court, freezing GHL’s accounts.
Bello described this as a clear abuse of judicial processes and reiterated that all payments to contractors and service providers involved in OML 120 were vetted and approved by FBN’s credit and risk teams, making allegations of fund diversion baseless.
Operational Challenges and Funding Delays
GHL criticized FBN’s failure to meet its funding commitments, citing delays in disbursing approved funds that sometimes extended up to 70 days.
- These delays disrupted operations, causing significant financial losses. Service providers, including Schlumberger and Baker Hughes, were reportedly paid sporadically, leading to inefficiencies and arbitration awards against GHL.
- Despite an initial disbursement of $185 million, FBN’s refusal to provide additional funding has stalled the development of OML 120.
GHL maintained that the loan was not yet due for repayment, as it remained within the moratorium period specified in the Subrogation Agreement.
What You Should Know
According to a leaked letter addressed to Central Bank Governor Yemi Cardoso, the conflict stems from an agreement between FBN and GHL initiated during the tenure of Oba Otudeko, the former Chairman of FBN Holdings Plc.
- In 2020, GHL partnered with FBN to develop OML 120 after the bank faced financial exposure from NPLs linked to Atlantic Energy.
- The arrangement was designed to revive FBN’s books, with profits from OML 120 shared to offset the NPLs.
- GHL alleges that FBN reneged on its obligations, delaying disbursements and causing significant financial setbacks, including the loss of the Blackford Dolphin drill ship, for which GHL now faces claims exceeding $100 million in arbitration.
