Court Nullifies FG’s Revocation of Dawes Island Marginal Field Licence, Orders Reinstatement

• Says government breached statutory procedure and right to fair hearing

Wale Igbintade

A Federal High Court sitting in Lagos has nullified the federal government’s revocation of the Dawes Island Marginal Field licence, declaring the action unlawful, unjustified and contrary to due process.

In a judgment delivered by Justice A. O. Awogboro, the court held that the Ministry of Petroleum Resources and the Minister of Petroleum Resources acted in breach of the Petroleum Act and the applicable guidelines governing marginal fields when they revoked the licence held by Eurafric Energy Limited.

Consequently, the court set aside the Notice of Revocation of the Dawes Island Marginal Field dated April 6, 2020, which stripped Eurafric Energy of its rights and interests in the oil asset.

Eurafric Energy had approached the court to challenge the revocation, insisting that it had substantially developed the Dawes Island Marginal Field and brought it to production before the licence was withdrawn.

The company told the court that it had produced 62,039 barrels of crude oil from the field and had obtained regulatory approvals for crude evacuation shortly before the revocation notice was issued.

Despite these developments, the Ministry of Petroleum Resources revoked the licence and subsequently awarded the field to Petralon 64 Limited, a move Eurafric Energy described as arbitrary and unlawful.

In her judgment, Justice Awogboro held that the federal government failed to justify the revocation, particularly in light of the plaintiff’s proven production activities.

The court declared that the action of the defendants in revoking the licence was not justified, having regard to the efforts of Eurafric Energy in bringing the field to production.

Justice Awogboro further ruled that the ministry and the minister failed to follow the procedure prescribed under the First Schedule to the Petroleum Act and the Guidelines for Farm-Out and Operation of Marginal Fields, 2001, before issuing the revocation notice.

According to the court, the defendants also breached Eurafric Energy’s statutory right to fair hearing by failing to inform the company of the grounds upon which the revocation was being contemplated or to give it an opportunity to respond.

The federal government had defended the revocation on the grounds that Eurafric Energy failed to bring the field to production by April 30, 2019.

However, the court rejected this argument, holding that failure to meet the stated production deadline was not a valid ground for revocation under either the Farm-Out Agreement or the Petroleum Act.

Justice Awogboro also held that the federal government was estopped from revoking the licence after approving crude evacuation from the field.

Evidence before the court showed that regulatory approval was granted in January 2020 for the evacuation of 34,000 barrels of crude oil aboard MT Breakthrough by ship-to-ship transfer and 28,000 barrels of crude oil to Aje Terminal (FPSO Front Puffin), with the approval valid for four months.

The court found that having approved crude evacuation, the government could not subsequently revoke the licence on the basis of alleged non-performance.

In addition to nullifying the revocation, the court set aside the award of the Dawes Island Marginal Field to Petralon 64 Limited, as well as the farm-out agreement executed between the Nigerian National Petroleum Corporation, now Nigerian National Petroleum Company Limited, and Petralon 64 Limited.

Justice Awogboro further restrained the defendants from transferring, reallocating, disposing of or otherwise alienating the Dawes Island Marginal Field to any person or group of persons.

The court ordered the federal government to forthwith renew the Dawes Island Marginal Field licence in favour of Eurafric Energy Limited upon payment of the requisite statutory fees and granted perpetual injunctions restraining the defendants from interfering with the company’s rights and interests in the field.

The court ordered as follows: “It is hereby declared that the Plaintiff is entitled to an extension/renewal of the marginal field licence in line with the provision of paragraph 6(59)(1) of the Petroleum (Drilling and Production) (Amendment) Regulations 2019.”

“It is hereby declared that the plaintiff, having progressed the work on the Dawes Island Marginal Field to the production of Sixty-Two Thousand and Thirty-Nine (62,039) barrels of crude oil, is entitled to the renewal of the farm-out for the remaining lifespan of the field.”

“It is hereby declared that the action of the defendants in revoking the Dawes Island Marginal Field Licence is not justified, having regard to the activities of the plaintiff in bringing the field to production.”

“It is hereby declared that the 1st and 2nd defendants did not follow the procedure prescribed in the First Schedule to the Petroleum Act before issuing the Notice of Revocation of the Dawes Island Marginal Field dated 6 April 2020.”

“It is hereby declared that the 1st and 2nd defendants breached the plaintiff’s statutory right to be heard by not informing the plaintiff of the grounds upon which the revocation was being contemplated and by failing to afford it an opportunity to respond.”

“It is hereby declared that the 1st and 2nd defendants did not lawfully revoke the plaintiff’s rights and interests in the Dawes Island Marginal Field, as a marginal field is not a revocable instrument within the meaning of the Petroleum Act and applicable guidelines.”

“It is hereby declared that the Dawes Island Marginal Field cannot be validly revoked where the Farm-Out Agreement duly approved by the defendants does not provide for such revocation.”

“It is hereby declared that the defendants are estopped from revoking the Dawes Island Marginal Field after approving the evacuation of crude oil from the field.”

“It is hereby declared that failure to bring the field to production by 30 April 2019 is not a valid ground for revocation under the Farm-Out Agreement or the Petroleum Act.”

“An order of court is hereby granted setting aside the Notice of Revocation of the Dawes Island Marginal Field dated 6 April 2020.”

“An order of court is hereby granted setting aside the award of the Dawes Island Marginal Field to Petralon 64 Limited.”

“An order of court is hereby made directing the defendants to renew forthwith the Dawes Island Marginal Field Licence in favour of the plaintiff upon payment of the requisite statutory fees.”

“An order of perpetual injunction is hereby granted restraining the defendants from transferring, reallocating, alienating or otherwise dealing with the Dawes Island Marginal Field.”

“An order of perpetual injunction is hereby granted restraining the defendants from terminating or transferring the plaintiff’s rights and interests in the Farm-Out Agreement in respect of the Dawes Island Marginal Field.”