Eni Temporarily Halts Arbitration Over Nigerian Oilfield Dispute
Eni SpA has made the decision to suspend the arbitration proceedings regarding the oilfield dispute with Nigerian authorities. The oilfield in question, oil prospecting license (OPL) 245, is suspected to be the largest oil block in Nigeria.
The primary rationale behind Eni’s decision to suspend the arbitration proceedings is to extend the negotiation timeframe and facilitate the conversion of the prospecting license into a production license. Eni and the Federal Government of Nigeria have agreed to temporarily halt the arbitration proceedings to engage in discussions concerning the essential measures for transitioning the license from prospecting to extraction.
This development comes shortly after Nigeria initiated the withdrawal of $1.1 billion in civil claims against Eni related to suspicions of misconduct in the OPL 245 agreement. An oil prospecting license permits a company to explore for oil, but upon the discovery of recoverable oil, the license must undergo a conversion process to become an oil mining license to enable the production and export of oil.
In 2011, Eni secured the rights for the OPL 245 offshore oilfield. However, due to several disputes, the area was never explored. In 2022, an appeals court ruled that Eni was not guilty in a corruption prosecution related to the deal for OPL 245. Nigeria is currently engaged in negotiations seeking improved terms for the block license compared to the previous agreement.
The recent developments indicate a positive trajectory in resolving outstanding disputes between Eni and the Nigerian government. These include the withdrawal of a fraud complaint and Eni’s commitment to divest its Nigeria onshore subsidiary.
Eni currently holds a Zack Rank #3 (Hold). Investors interested in the energy sector might consider companies with a Zacks Rank #1 (Strong Buy). Notable companies in the industry exhibiting a Zacks Rank #1 include PBF Energy Inc., Liberty Energy, and Matador Resources Company.
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