Supreme Court orders release of crude aboard FPSO Tamara Tokoni to GHL
The Supreme Court ordered the release of crude oil aboard the FPSO Tamara Tokoni to GHL, ruling that FirstBank’s claim was contractual, not maritime.
The Supreme Court has ordered the immediate release of crude oil aboard the FPSO Tamara Tokoni to General Hydrocarbons Limited (GHL). In a unanimous judgment delivered on Friday, the apex court dismissed the case instituted by First Bank of Nigeria, holding that the dispute was contractual in nature and did not fall within the jurisdiction of the Federal High Court as an admiralty matter.
The dispute involves crude produced from OML 120 and stored aboard the FPSO Tamara Tokoni. In May 2021, First Bank and GHL entered into a subrogation agreement under which the lender financed the development of the oil block, with proceeds from crude sales expected to be paid into a designated collection account. First Bank later accused GHL of breaching the financing agreement and diverting proceeds from crude sales, claiming GHL owed about $19 million under the arrangement.
The Supreme Court set aside the judgment of the Court of Appeal, ruling that justices of the lower courts lacked jurisdiction to entertain the matter as an admiralty case. “The cause of action is breach of the financing agreement by the appellant not paying the proceeds of the crude oil produced and lifted from OML120 into a collection account,” said Justice Emmanuel Agim, who read the judgment.
The court emphasised that First Bank does not have any right to seize the crude cargo. “The fact that FBN financed the appellant’s production of the crude oil and was entitled to recover the facility from the proceeds of sale of the produced crude paid by the appellant into a designated account maintained with it, did not by itself give FBN ownership of the crude oil or make the crude oil security for the financing,” the court held.
The winners: GHL, which now has access to its crude cargo. The losers: First Bank, which lost its claim and may struggle to recover the $19 million it claims it is owed.
Bottom Line: A bank that finances oil production does not own the oil. The Supreme Court just made that clear.