Procedural Posture

This document is the Final Award on damages issued by a majority of the arbitral tribunal in an arbitration seated in London, United Kingdom, under the rules of the Nigerian Arbitration and Conciliation Act. The proceedings arise from a Gas Supply and Processing Agreement (GSPA) between Process and Industrial Developments Limited (Claimant) and the Ministry of Petroleum Resources of the Federal Republic of Nigeria (Respondent). The Tribunal previously issued a Partial Final Award on jurisdiction and a second Partial Final Award on liability, finding that the Respondent had repudiated the GSPA and was liable in damages. The present phase is dedicated exclusively to the quantification of those damages.

Factual Background and Legal Issues

The principal legal issue addressed is the measure of damages resulting from the Respondent's repudiatory breach of the GSPA, under which the Respondent was obligated to supply Wet Gas for the Claimant to process. The Respondent argued that the Claimant was entitled only to nominal damages because it had not yet acquired a site or constructed the gas processing facilities (GPFs) at the time of the breach. The Tribunal rejected this argument, applying the standard from Hadley v Baxendale and relevant Nigerian and English case law, holding that the Claimant is entitled to be placed in the position it would have been in had the contract been performed. The Tribunal found on a balance of probabilities that the Claimant would have performed its obligations and that the loss of prospective profits flowed naturally from the repudiation.

Tribunal's Analysis on Quantum

In calculating the damages, the Tribunal assessed the projected capital expenditure (CAPEX) and operational expenditure (OPEX) required to construct and operate the GPFs, relying heavily on the Claimant's engineering expert. The Tribunal dismissed the Respondent's expert critiques as lacking sufficient evidentiary foundation, noting that the Respondent's expert failed to adequately challenge the Claimant's assumptions during cross-examination. Regarding projected income, the Tribunal evaluated the expected yield of Natural Gas Liquids (NGLs) and future oil prices. The Tribunal adopted the Claimant's expert forecasts based on the International Energy Agency's New Policies scenario, finding it to be the most reliable estimate available at the time of the hearing. The Tribunal applied a 7% discount rate to account for the time value of money and the risk of investing in Nigeria, rejecting the Respondent's argument for a higher discount rate or a reduction for failure to mitigate.

Decision and Relief

The majority of the Tribunal concluded that the net present value of the profits the Claimant would have earned over the 20-year term of the GSPA amounted to $6,597,000,000. Consequently, the Tribunal ordered the Respondent to pay the Claimant this principal sum, together with interest at the rate of 7% per annum from 20 March 2013 until the date of the award, and at the same rate thereafter until payment is made.