Insurance Jottings

Nigerian Oil Producer Sues Shell for More Than US$2 Billion Over Ownership of Wells

A Nigerian oil producer has sued Royal Dutch Shell Plc for more than US$2 billion over the ownership of oil wells, intensifying a dispute around an asset sale completed six years ago.

Aiteo Eastern E&P Company Ltd claims that Shell falsely portrayed itself as the owner of six wells which it believed were included in a 2015 asset sale, but they actually belonged to the West African nation’s state energy company.

Aiteo said it has been deprived of over 70 million barrels of crude and wants a judge to order Shell to pay compensation.

The lawsuit is the latest demonstration of how far relations between the companies have soured since Aiteo’s acquisition of a major interest in a prized oil block operated by Shell. In addition to the latest legal dispute, the Anglo-Dutch giant and other lenders allege that Aiteo owes them nearly US$1 billion, while the Nigerian firm claims it was misled by Shell.

Shell made “fraudulent misrepresentations” about six of 100 wells included in Oil Mining Licence 29, known as OML 29, which had been transferred to the Nigerian National Petroleum Corporation in 2009, Aiteo said in a complaint filed at a federal court in Abuja on the 27^th July. The buyer only discovered it didn’t own the infrastructure last year when they featured in a government auction of so-called marginal fields, according to the complaint, which media reported on for the first time this week.

Shell “fulfilled its obligations under the sale and purchase agreement signed between the parties, and acted in accordance with relevant Nigerian laws,” a spokesman said by e-mail. The company “will defend its position,” he said.

The Department of Petroleum Resources, which oversaw the recent licensing round, didn’t respond to questions.

Aiteo acquired a 45% stake in OML 29 from a consortium of Shell, TotalEnergies SE and Eni SpA, with NNPC retaining the rest. The sale price of US$2.4 billion was the largest paid so far by Nigerian producers, which have been buying onshore and shallow-water offshore assets from international oil companies for more than a decade.

Materials provided by Shell said the half dozen wells contained 73 million barrels of oil, the lawsuit alleges. The Nigerian firm is entitled to US$2.1 billion to cover its share of the lost crude, according to the complaint.

Shell and Nigerian banks, which provided US$504 million and US$1.5 billion respectively to support the purchase of OML 29, were already embroiled in a dispute with Aiteo over allegations it had defaulted.

The outstanding amount stood at US$910 million at the end of September 2020, including US$233 million owed to Shell, according to documents the creditors submitted in December to the International Chamber of Commerce in London.

Aiteo, controlled by Nigerian tycoon Benedict Peters, blames Shell for its difficulties servicing the loans and is already fighting the company in two other cases before courts in Abuja and Lagos.

The “purported inability” of Aiteo “to fully repay its alleged indebtedness to its financiers is directly attributable to the wrongful actions” of Shell, the Nigerian company said it the latest lawsuit.

Tokio Marine joins thermal coal retrenchment trend

Tokio Marine Holdings will stop underwriting and financing new coal mining projects that generate thermal power in Japan and abroad from October 2021, becoming the first Japanese non-life insurer to do so.

UK Financial Services Sector Calls for Eased Visa Requirements to Keep Competitiveness

Britain’s financial sector has called on the government to ease visa requirements on overseas staff who want to work up to six months in the country to maintain global competitiveness.

On the 30^th September a Global Talent Mobility report from TheCityUK, City of London Corporation and consultants EY set out ways to overcome “practical challenges” being faced by banks, fintech and insurers in hiring sufficient talent

A “hybrid” short-term business visa would allow staff to work in Britain for a short

time without the red tape involved with full work visa requirements, the report said.

“Without it, we will not be able to innovate in key growth areas like fintech or green finance, nor build out our international trading networks,” said Miles Celic, CEO of TheCityUK.

The report said that within UK-based financial services, 19.5% of workers are international, rising to 42% in fintech, one of the growth areas in finance targeted by the government.

Since the introduction of Britain’s new immigration system in January, financial and related professional services firms are seeing significant cost increases to securing the high-skilled talent they need to compete on the global stage, the report said.

Worries about recruiting have become central for finance after Britain fully left the European Union last December, largely cutting off the city from the continent.

Ending the free movement of EU workers in Britain is a central tenet of Brexit, and Britain has just reluctantly agreed temporary visas for 5,000 foreign truck drivers until Christmas after gas pumps ran dry across the country.

Britain’s finance ministry has already said it would introduce a “fast track” work visa in the fintech sector and is reviewing rules on intra-company staffing transfers.

“There continued to be support for a broader view to be taken in free trade agreements that could facilitate the assignment of employees for a short period,” the report said.

UK gov appoints head of new unit expected to scrutinise state-backed insurance entities

The UK government has appointed a banker to lead a new specialist unit tasked with ensuring HM Treasury (HMT) receives greater compensation for the £400bn+ of guarantees it provides to a variety of sectors, including P&C insurance.

The London-based banker Siobhan Duffy heads the Contingent Liability Central Capability (CLCC), a newly created unit which will advise HMT on opportunities to increase its income from its multiple guarantees while at the same time also identifying options to reduce the UK government’s contingent liabilities burden.

The appointment comes as the government continues its review into terrorism backstop Pool Re, which some fear will conclude with a recommendation to end the current unlimited guarantee in exchange for a reduced, fixed cap. Such a move would be unwelcome among the mutual’s UK insurer members unless Pool Re’s management and board are able to agree a new structure with HMT that overcomes those concerns.

Last year, the UK insurance industry’s recommendation that the government provide an unlimited guarantee for a new pandemic reinsurer, Pandemic Re, received a lukewarm reception from government officials, suggesting that HMT is reluctant to entertain more contingent liabilities on behalf of insurers and certainly any that are uncapped.

Pool Re is thought to be second only to student loans as the largest contingent liability on the UK government’s balance sheet but there are a number of other insurance entities – including Flood Re and the Nuclear Terrorism Pool – which also benefit from taxpayer guarantee support.

Prior to joining HMT, Ms Duffy spent over 25 years working in debt capital markets structuring and advising European corporates on debt issuance.

During her career she has held several leadership roles, including global head of private placement at NatWest Markets and Royal Bank of Scotland. Prior to that, she served as head of private debt at ABN Amro.

Most recently, she established a debt distribution platform for London Bridge Capital, an independent corporate finance firm.

The CLCC sits within HM Treasury’s UK Government Investments unit, which oversees corporate governance and corporate finance.

The concept of a new central unit was first identified by HMT’s Balance Sheet Review in 2017 and set out in the Government as Insurer of Last Resort report published in March 2020.

The 2020 report recommends the government seek “appropriate compensation” for the insurance and guarantees which HMT provides.

Leading the search for the CLCC head was Ian Lazarus, an experienced insurance and financial services recruiter specialising in senior executives.