Oil major planning extension of expired SPA with SEPLAT-

Chevron Nigeria Limited, the in-country repr sentative of international oil company, Chevron Corp, owners of oil assets, oil mining licenses (OMLs)52,53, and 55, which sale has become controversial and currently under litigation in the courts, is believed to be planning to spring a surprise by extending the expired Sale Purchase Agreement it controversially entered with the consortium led by Seplat, industry sources monitoring the more than a year-long bid process revealed to PRESS over the weekend.

But Deji Haastrup, Chevron Nigeria general manager, Government and Public Affairs, in a phone text message in response to questions, said although he was away on vacation, he was not aware of any such extension, adding that since the subject matter is currently before the courts, “we cannot comment on it at this time.”

Analysts say it is this particular position, putting up a public face that the matter is in court, but pushing ahead behind the scene to sign a controversial SPA and now planning to extend it after it’s one year life has expired, that appear confusing and worrying.

The asset sales became controversial when Chevron, after an apparent bid to talk up its transparency profile and opening up the sales to a public bidding process, failed to make a public announcement of a winner, a reserve bidder and unsuccessful bids, and controversially turned its back on the highest bidder, Brittania-U Nigeria Limited, and began to surreptitiously deal with Seplat.

Brittania-U had then gone to court to contest Chevron Nigeria’s action of not declaring it winner after it posted a highest bid for the assets with an amount of $1.67 billion which was later revised to $1.015 billion after a meeting between both companies’ officials. Seplat had posted a bid of only $630 million for the three assets.
The bid procedure documents seen by BusinessDay had required bidders to be ready to post 15 percent of the value of their bids in irrevocable Letter of Credit and Brittania-U had paid $250 million to back up its bid, which it made at the conclusion of the bid process on September 20, 2013.
This irrevocable letter of credit is still with Chevron and has not been returned to the company.

Chevron attempted in the third quarter of this year to threaten the bankers who issued and backed the ILC to withdraw their backing but barely succeeded, as the power to withdraw actually lies with Brittania-U.
It is still not clear why Chevron Corporation, an American global oil player, which wants to be seen as a transparent operator, has allowed this process to become murky.
In email communications seen by BusinessDay, it is clearly shown that the oil major was dealing with Brittania-U once the bid process closed, especially in relation to the revising of Brittania-U’s initial bid of $1.67 billion to $1.015 billion, which was accepted by Chevron, as shown in emails sent to the management of Brittania -U by Chevron’s commercial consultant, Hermon Patel, on the transaction.
In one particular email sent on November 17, 2013 Patel told Brittania –U that Chevron lawyers were revising the SPA between the two parties, a situation which some lawyers interpreted to mean there was already a contract between the two parties.

Besides, they say that the fact that Chevron and Brittania-U worked to revise the initial bid which was accepted with a deposit of $250 million, an amount which has been with Chevron for about 18 months, question’s Chevron claim to transparency on this deal.
One message sent by Hemant Patel read: “Mrs Uju, sorry I am out of Houston this weekend. Our lawyers are revising the SPA.”

It has since come to light also, that at the time Chevron was dealing with Brittania-U, it was double dealing with Seplat. For instance, the now expired SPA between Seplat consortium and Chevron Nigeria (which BusinessDay is in possession of) was initially entered into before the whole transaction was enmeshed in legal tussles. With the case prolonged in court, the SPA naturally ran out its one year course, say industry sources, adding that it would be an affront on the Nigerian judicial system if another SPA was entered before the case in court is disposed of.

The initial SPA, tagged “execution version” was simply dated the month of November 2013. In Clause C of the recital contained in the SPA, it stated thus: “SEPLAT Petroleum Development Company plc, AMNI International Petroleum Development Company Limited, and Belema Producing Limited have formed a consortium for the purpose of the transaction contemplated by this agreement (“the SEPLAT consortium”) on the term set out in an amended and Restated Consortium Agreement entered into between them and dated 14 November 2013. (“the consortium Agreement”). In accordance with the consortium Agreement, the members of Seplat Consortium, which comprises the Buyers, have agreed to apportion the right and liabilities to the assets. Nothing in this agreement shall be deemed to create a partnership between the members of SEPLAT consortium.”

It was this undated SPA (which insiders say would have been prepared around November 4, 2013) that was later revised and replaced with a new one dated November 14, 2013.
BusinessDay has since found out from examining the bid process documents that Chevron bid rules forbade the forming of consortia after the bid had closed. People familiar with this process said even if this were to happen, other participants in the bid ought to have been informed about this development so that Chevron would have been seen to have created a level playing field for one and all.

Another thing that has been considered intriguing about the whole continuously unfolding saga, is that while Ali Moshiri, president, Chevron Africa and Latin America exploration and production company, was leading a Chevron team to hold a meeting with Brittania-U management in Houston, United States, and their bankers, where they accepted the revised bid offer of $1.015 billion with $250 million or 15 percent of initial bid price, some officials of Chevron Corporation were also holding a separate meeting with SEPLAT consortium in London on the same subject matter.
The actions of Chevron throughout the exercise, in particular post-bid behaviour, have raise a number of questions, industry analysts say.

The questions include: Why should Chevron accept a reversed consortium agreement after the bid had closed as it is now being alleged? This is particularly giving some industry watchers that have been following the development some concern. They said this borders on lack of transparency in the whole process.

On the issue of announcement of the highest bidder, one analyst familiar with bidding process wondered why Chevron did not announce the highest bidder publicly, as there is no evidence in any local or international newspaper to suggest that such was done. “The company should have announced the highest bidder as it did in the first stage of the process,” said the source.

Besides, industry sources close to Brittania-U told BusinessDay that the company was never given a letter of award nor was it allowed to fund the bid amount within 90 days, in line with bid procedure, and that it failed to this before it went ahead to sign an SPA in November 2013, when the bid actually closed on September 30th 2013, less than the 90 days provided for the highest bidder to fund the bid amount.