General Hydrocarbons Limited (GHL) has accused First Bank of Nigeria (FBN) of breaching key financing agreements and causing significant financial losses in a dispute related to oil field development. The matter came to light yesterday after FBN obtained an injunction against GHL, freezing the assets of GHL Chairman Nduka Obaigbena over a $225.8 million loan dispute.
Background of the Dispute
The accusation is detailed in a letter dated November 7, 2024, addressed to the Governor of the Central Bank of Nigeria (CBN) and signed by GHL Chairman Nduka Obaigbena. The letter outlined a series of alleged breaches by FBN, including failure to disburse agreed financing for the development of Oil Mining Lease (OML) 120, despite a Memorandum of Understanding (MOU) and a Tripartite Deed signed between GHL, FBN, and the Asset Management Corporation of Nigeria (AMCON).
GHL explained that in 2020, FBN faced a non-performing loan crisis linked to Atlantic Energy Drilling Concept Nigeria Limited, which resulted in a $718 million unsecured exposure. Seeking a solution, then-FBN Chairman Oba Otudeko approached GHL due to its valid oil mining licenses. An agreement was reached for FBN to finance the development of OML 120, with profits shared equally to repay the debt.
However, GHL alleges that after FBN avoided significant losses and improved its financial standing due to GHL’s involvement, the bank began delaying payments critical for the development project. Over 70 payment requests reportedly took between 7 and 67 days instead of the stipulated five days, causing project delays and a $47 million financial loss.
Alleged Operational Failures and Consequences
GHL further claims that FBN’s failure to disburse funds on time led to operational risks, including a near-disaster on a drilling rig where over 100 personnel were stranded without food or water. The letter also highlights instances where FBN allegedly delayed payments for approved services and hindered third-party financing offers.
These delays reportedly resulted in the loss of over 217 working days, further exacerbating financial losses for GHL. Additionally, GHL cited instances where operational challenges forced it to rely on emergency assistance from companies like Shell and Mobil to prevent dangerous situations on offshore rigs.
The company contends that despite its efforts to meet financial obligations and avoid operational disruptions, FBN’s actions have repeatedly undermined the progress of the OML 120 project.
Legal Actions and Requests for Intervention
The letter accuses FBN of introducing a “Framework Agreement” in October 2024, which would give the bank control over GHL’s oil assets and management, despite previous agreements. GHL asserts that this move contradicts the Petroleum Industry Act and seeks to undermine the original financing structure.
GHL has requested the CBN Governor to intervene by directing FBN to honor its financing obligations and debit FBN’s accounts with CBN to cover a $53 million payment needed for the Oyo 8 workover project, citing the risk of further financial losses and reputational damage.
The dispute remains ongoing, with GHL emphasizing its commitment to pursuing all legal avenues to protect its business interests and ensure compliance with the financing agreements. GHL further warned that failure to address these issues promptly could impact broader market confidence and risk further project delays, which could be detrimental to both the oil sector and financial stability.