Nigerian oil trader Aiteo, which had recorded stratospheric growth during the term of former Nigerian president Goodluck Jonathan, has recently had to start making hefty repayments to creditors that had helped the group to acquire the lucrative OML 29, which pumps almost 100,000 barrels of crude per day.
To purchase a 45% stake in OML 29 from oil majors Shell, ENI and Total for $2.58 billion, Mr Peters borrowed nearly $2 billion from various Nigerian banks. He financed the rest of the sum with his own fortune, largely built on extremely lucrative swap contracts won when the controversial fugitive Diezani Alison-Madueke was the Minister of Petroleum Resources.
When Aiteo had trouble meeting its repayments in 2016, it renegotiated an 18-month grace period with the banks that ended in June. Since that date, Aiteo has had to pay out heavy sums and is understood to be trying to negotiate another arrangement. The oil firm had bought OML 29 when crude oil prices regularly peaked over $100 and the sale price matched its market value.
However, the sharp downturn in oil prices halfway through 2014 made the loan unworkable. Nearly all of the trader’s revenue from the licence goes straight into paying back its creditors. With production dampened by a string of attacks on its pipelines in Niger Delta and the continued lull in oil prices, Aiteo has struggled to meet its reimbursement deadlines.
Mr Peters, who has lived in Ghana since 2016, can no longer count on his financial director, Bruce Burrows, hired in 2017 to help work out a new deal with the banks. Burrows, who previously worked for Ernst and Young and Seven Energy and now lives in London, was sacked by Peters in October, though he had never been given much room for manoeuvre.
Peters delegates very little, except to his older brother Francis Peters who handles the firm’s relations with financial institutions and government agencies.
Aiteo’s finances are currently being overseen by Nigerian bankeer Razak Shittu, former head of the energy desk at the United Bank for Africa (UBA). Mr Shittu is understood to be actively been pushing for a favourable repayment schedule.
In addition to the relentless pressure from its lenders, Aiteo’s problems have been further compounded by the strict terms it negotiated in 2014 with the former owner of OML 29, Shell, which had stipulated that Aiteo would have to sell nearly all its output from the Oil Mining Lease – currently between 80000 and 90000 barrels per day, to Shell’s trading arm.
Shell’s trading division had already lent millions of dollars to Aiteo to purchase OML 29 and given that Aiteo accepted Shell’s strict negotiating terms, Aiteo might be forced to partner with Shell for at least ten years at the block’s current output levels.
Aiteo’s margins will also shrink considerably since the formula used for the sale price of OML 29 crude oil compels Peters to guarantee Shell a very comfortable margin estimated at more than $1 per barrel.
Aiteo also accepted to use Shell’s Bonny oil terminal, whose transfer rates sit at just over $2 a barrel. Shortly following the OML 29 sale, one of Shell’s main negotiators for the operation, British expert Humphrey Doody, became a board member of Aiteo. However, according to sources in Lagos, Doody was recently made to step down from this role.