Oilfield Feud: GHL Slaps First Bank with $1 Billion Lawsuit over OML120 dispute

General Hydrocarbons Limited (GHL) has announced plans to sue First Bank of Nigeria (FBN) for $1 billion in damages, alleging breach of contract over the development of Oil Mining Lease (OML) 120. This lawsuit comes amidst increasing calls from shareholders for leadership changes at the bank.

GHL claims that First Bank failed to honor its contractual obligations to fund the exploration and development of the oil asset, resulting in significant financial losses. According to documents provided, these losses include over $47 million and 217 days of operational downtime.

Adding to the controversy, GHL accused First Bank of securing a court injunction to freeze its funds—amounting to $225.8 million—across multiple commercial banks, allegedly in violation of a pre-existing court order.  

The financial strain on GHL has been severe. The company disclosed that it faces a $15 million default penalty, due by November 14, 2024, related to the TotalEnergies farm-out of the Noble Rig. GHL asserts that First Bank’s non-payment obligations have placed the oil firm in jeopardy, with mounting liabilities to global service providers such as Schlumberger, Baker Hughes, Halliburton, Marine Platforms, and Century FPSO.  

“For over three years, despite repeated demands, First Bank has refused to fund salaries and operational expenses for GHL staff, offices, and operations. If they cannot fund basic operations, how do they intend to finance additional asset management?” GHL reportedly questioned.

The oil company further alleged that its agreement with First Bank had previously spared the bank a staggering N302 billion loan loss provision, allowing the institution to post a profit of N151 billion for the fiscal year ending December 31, 2021.  

“First Bank’s books became performing, saving it from a market crisis and restoring confidence. However, it seems they leveraged GHL to achieve profitability under false pretenses, with no intention of fulfilling their financial obligations,” GHL stated in its documents.

Amid these disputes, shareholders holding a combined 10% stake in First Bank Holdings Plc have called for an Extraordinary General Meeting (EGM) under Section 215(1) of the Companies and Allied Matters Act (CAMA).  

This group, including Barbican Capital Limited and Norsworthy Investment Limited, seeks the removal of prominent board members, such as Femi Otedola and Omodayo-Owotuga, the Deputy Chief Executive of Geregu Power Plc. They are advocating for the return of former board member Obafemi Adedamola Otudeko.

The shareholders are also opposing the bank’s N350 billion private placement proposal, urging instead for a rights issue, which would give existing shareholders priority in raising capital.  

As GHL threatens legal action, First Bank’s Managing Director/Chief Executive Officer, Olusegun Alebiosu, and other directors face contempt charges. The outcome of this high-stakes conflict could reshape both the financial and operational landscapes of the bank and the oil firm, with billions of dollars hanging in the balance.

This case underscores broader challenges within Nigeria’s oil and banking sectors, highlighting the need for improved corporate governance and accountability in the face of significant financial and operational risks.