The Nigerian Federal Government and Pan Ocean Oil Corporation (Nigeria) Limited are embroiled in a legal dispute over alleged unpaid royalties and operational costs. The government has filed a suit against Pan Ocean, claiming non-payment of $49,936,088.31 in oil and gas royalties, concession rentals, and gas flaring penalties related to Oil Mining Lease (OML) 98.

According to the government's amended statement of claim, Pan Ocean failed to meet its statutory obligations under the Petroleum Act despite repeated demands. The government alleges that Pan Ocean acknowledged the debt in a letter but has refused to pay. The Minister of Petroleum Resources eventually revoked OML 98 due to Pan Ocean’s non-compliance.

The government seeks a declaration confirming Pan Ocean’s liability and an order compelling the company to pay the outstanding amount as of March 24, 2019, along with interest at 10 percent per annum from February 1, 2019, until the debt is fully paid. They argue that the unpaid royalties deprive the government of vital revenue needed for national development.

In response, Pan Ocean denies most of the government’s allegations and has filed a counter-claim for approximately $110 million. The company attributes its inability to meet payment obligations to the Nigerian National Petroleum Corporation (NNPC)’s alleged seizure of its share of crude oil worth $24,091,674 between January 2018 and March 2019. Pan Ocean also cites heavy capital investments, including a seismic survey, a gas processing plant, and a crude export pipeline, as reasons for its financial strain.

Pan Ocean claims to have invested $20.87 million in a seismic survey intended to boost the declining production capacity of OML 98. After the revocation of OML 98, Pan Ocean continued to operate the lease as a default operator on behalf of the government until May 2021, incurring $65.35 million in operational costs, of which $36 million has been reconciled with the Department of Petroleum Resources (now the Nigerian Upstream Petroleum Regulatory Commission, NUPRC). The company is seeking reimbursement for all expenses incurred during its operation of OML 98, asserting its right to offset the reconciled costs against the government’s claim.

Pan Ocean’s counter-claim includes $65,352,399 for post-revocation operations, $20,874,164.40 for its share of the seismic data project, and $24,091,674 as its share of crude oil proceeds allegedly withheld. The legal battle continues before the Federal High Court in Lagos.