An attempt by commodity trader BB Energy to claw back a loan to the government of South Sudan has expanded to include a clutch of other traders claiming ownership of oil cargoes due to be delivered as soon as this week.
BB Energy argued before a London court today for an injunction against the delivery of three cargoes of South Sudanese crude it says it has contractual rights over and which are due to be lifted between May 29 and June 15.
The move pits the London-headquartered trader against Dubai peers BGN, Chiangwei and a company referred to in court as A&M, each of which has pre-paid South Sudan for one of the cargoes.
BB Energy’s barrister Luke Pearce told the court the company would suffer “very serious losses” of between US$150mn and US$180mn if no injunction was granted and the three cargoes were sold to the alternative buyers.
BB Energy extended a US$100mn loan to South Sudan in February last year, according to previous court proceedings, due to be repaid in cash or oil cargoes. Oil prices have soared since the pre-payments were made due to conflict in the Middle East, raising the market value of the cargoes due from South Sudan.
In recent years, South Sudan has leaned heavily on oil pre-payment loans from commodity traders and banks as a key source of government revenue. However most of the loans have not been repaid and instead of providing the oil cargoes to lenders, the country has sold them to other buyers, GTR has previously reported.
BB Energy told the court that South Sudan is due to deliver one cargo by May 29 and a further two by mid-June, and that these are the only cargoes that the country can use to satisfy its debt to the trader.
Lawyers for BGN, Chiangwei and A&M said they have already chartered or nominated vessels to lift the cargo from a port in Sudan, with one tanker due to arrive tomorrow.
But Pearce claimed the trio struck pre-payment deals with South Sudan despite being made aware that the deals would cause South Sudan to breach its contract with BB Energy.
He said BB Energy’s lawyers wrote to BGN on December 21 urging them not to enter into an agreement with South Sudan, but “the very next day” BGN agreed to pay the government US$50mn up front for the cargoes.
BGN said it did not receive the letter and the trader’s barrister Poonam Melwani argued BB Energy had not proven that it had contractual rights to the three cargoes.
If even a limited injunction is made, “our sales are lost and we may be sued for who knows what”, she said, adding BGN pre-paid US$45mn for the cargoes, but they are now worth “roughly” US$60mn each.
Robert Thomas, a barrister representing A&M, said BB Energy’s failure to recoup cargoes is “a problem of the claimant’s own making and the consequences shouldn’t be visited on the [traders]”.
BB Energy claimed A&M was established only in April this year, and that it appeared to share the same director and office as Chiangwei, whose website says is headquartered in Dubai. Chiangwei did not participate in the hearing.
Thomas said in response that “sniping” from BB Energy about the company’s position and evidence was “beside the point”.
Singapore company Cathay Petroleum is the sub-sub-buyer of at least one of the cargoes, the court heard. A lawyer representing the firm also opposed the injunction, arguing it stands to face “substantial losses” if it does not receive the oil and that BB Energy has other ways of recouping its losses, such as through litigation in South Sudan.
Judge Mark Pelling said he would deliver judgment on May 29.
BB Energy has made several applications to London’s High Court since November last year in an attempt to enforce repayment of its loan, but so far has managed to secure just one cargo.
Earlier this month the High Court ordered the South Sudanese government and third parties, such as traders and banks, not to enter into or facilitate any pre-payment arrangements until BB Energy has been repaid, pending a June 5 hearing.
South Sudan owed almost US$2.3bn to banks including QNB and the African Export-Import Bank, as well as other commodity traders, according to a GTR analysis published in June last year.
BB Energy declined to comment. BGN, Chiangwei and Cathay Petroleum did not immediately respond to requests for comment. GTR was unable to locate contact details for A&M.
