Exxon, Shell face legal challenges over soured Nigerian deal

Oil majors including Exxon Mobil Corp. and Royal Dutch Shell Plc are facing uphill battles to convince U.S. courts to enforce multi-billion dollar arbitration awards they secured against Nigeria’s state oil company.

The companies accused the Nigerian National Petroleum Corp. of taking more crude than it was entitled to under four deals that were signed in 1993 to incentivise them to develop deep offshore blocks. Those projects today account for about 30% of the country’s 2 million barrels of daily output.

Independent arbitration tribunals seated in Nigeria sided with the companies and awarded them damages. But the NNPC successfully challenged the awards in the Nigerian courts, which ruled the disagreements were either tax disputes and not subject to arbitration, or the tribunals had no right to impose the penalties.

In September last year, the U.S. District Court for the Southern District of New York dismissed a lawsuit filed by Exxon and Shell units that aimed at enforcing a 2011 arbitration ruling requiring NNPC to pay them $1.8 billion for a contractual breach. Judge William Pauley noted that the companies had multiple appeals pending in Nigeria.


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