In the high-stakes theatre of Nigerian oil and gas, the battle for Dawes Island has always been framed as a contest between operators.
Eurafric versus Petralon. Incumbent versus Challenger. The old guard versus the reformer.
But when Justice A.O. Awogboro of the Federal High Court, Lagos, delivered his 84-page judgment in *Suit No. FHC/L/CS/628/2021* on 29 January 2026, he reframed the entire production.
This was never a dispute between two private companies.
It was a dispute about the limits of executive power.
And while the African Energy Chamber (AEC) has condemned the ruling as “judicial overreach,” a growing consensus among legal practitioners in Lagos and Abuja suggests the judgment is not an attack on the “drill or drop” policy, it is a warning that the policy has been implemented without a legal seatbelt.
The Question Every Investor Is Asking
Since the judgment was handed down, declaring the 2020 revocation unlawful and the subsequent award to Petralon null and void, international lenders and local banks have been quietly circulating a single question:
“If a license revoked in 2020 can be declared void in 2026, what assurances do we have regarding assets acquired in 2025?”It is a question the AEC’s press release failed to answer.
“Investor confidence is not damaged by courts doing their job,” said [Name], partner at a Lagos-based commercial law firm not involved in the litigation.
“Investor confidence is damaged by the discovery that an asset changed hands without valid statutory authority. The judgment didn’t create that defect. It merely exposed it.”
The PIA And The Retrospectivity Trap
The AEC’s primary legal grievance is that the Court applied provisions of the Petroleum Industry Act (PIA) 2021 to events preceding its enactment.
But did it?
According to the judgment as read in open court, the core finding was not based on the PIA. It was based on the legal regime operational in 2019 and 2020 specifically, the 1969 Petroleum Act and the Department of Petroleum Resources (DPR) guidelines.
The Court found that the revocation did not comply with the extant regulations at the time it was made.
“If the act was void ab initio, the subsequent enactment of the PIA cannot breathe life into a corpse,” constitutional lawyer John Owubokiri explained.
“The PIA did not retrospectively authorize illegality. The Court simply looked at the documents before it and asked: Was the Minister empowered to do this in 2020? The answer was no.”
This distinction matters. If the AEC wishes to defend the policy of marginal field reallocation, it must separate that defense from the legality of a specific administrative act.
The Unsigned Agreement Problem
One of the most technically complex aspects of the judgment, largely absent from the AEC’s summary, concerns the legal status of Petralon’s entry into the asset.
Petralon acquired its interest through a farm-out agreement. That agreement, central to its claim of title, was unsigned.
The AEC has argued that reliance on an unsigned farm-out agreement “departs from established contract law principles.”
This is correct.But the corollary is fatal to Petralon’s position.
If the unsigned agreement created no binding obligations, then Petralon’s initial entry into the Joint Venture and all rights derived therefrom rests on shaky legal ground.
You cannot simultaneously argue that an unsigned document is insufficient to bind Eurafric to a farm-out, yet sufficient to vest Petralon with an equitable interest worth $60 million.
“The Court appears to have applied a symmetrical view of contract law,” said Melvin Daminabo, a lawyer monitoring the case. “If it’s not binding for one party, it’s not binding for the other. You cannot selectively enforce unsigned documents.”
The 62,000 Barrels: A Tax And Royalty Time Bomb
Beyond the question of title lies a more immediate fiscal concern.
The AEC has dismissed 62,000 barrels of production as a “technical evaluation.”
Yet if those 62,000 barrels were produced, evacuated, and sold—as the evidentiary record suggests—they attracted royalty obligations to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Industry sources indicate that while Petralon has commenced royalty payments on its post-2022 production, the status of royalty remittances on the original 62,000 barrels remains opaque.
“If royalty was due and not paid, that is a separate statutory violation,” a fiscal compliance expert noted.
“If royalty was paid, the question is: Who paid it, and from whose account? The JV operated as a single economic entity during that period. You cannot bifurcate production revenue for the benefit of one partner and not the other.”
This is not merely a private dispute. It is a matter of federal revenue assurance.
The Parliamentary Dimension
The AEC’s press release omitted any reference to the findings of the House of Representatives Committee on Public Petitions.
This is a significant omission.
The Committee, following its own investigation, described the award of Dawes Island to Petralon exclusively as “inequitable, suspicious, and irregular.”
It recommended reinstatement of the original Joint Venture.While parliamentary committees do not possess judicial powers, their investigative findings carry evidentiary weight.
The Court was entitled to consider that a coordinate branch of government had already expressed grave concerns regarding the procedural fairness of the award.
“The Executive, the Legislature, and the Judiciary have now all examined this matter,” a source in the National Assembly remarked. “Two of those branches found serious irregularities. At what point do we stop blaming the judges and start reviewing the process?”
The Stay Of Execution: What Comes Next?
Petralon has secured a stay of execution pending appeal. The asset remains, for now, under its operational control.
But an appeal does not erase the factual record.
On appeal, Petralon must demonstrate that the trial court erred in law or fact. It must show that the revocation was lawful under the 1969 Act, or that the unsigned farm-out agreement created enforceable rights, or that the 62,000 barrels do not constitute production within the meaning of the regulations.
These are high hurdles.
“The Court of Appeal will not retry the case,” a procedural expert explained. “It reviews for errors. If the trial court’s findings of fact are supported by evidence and the record shows extensive documentation of production, costs, and the secret petition those findings are likely to be sustained.”
The Broader Signal To The Market
The AEC warns that this judgment “sends the wrong signal.”
But international energy investors have long memories.
In the 1990s and 2000s, Nigeria struggled to attract deepwater capital because the sanctity of contract was viewed as conditional—subject to political winds, regulatory whim, and retroactive legislative amendment.
The PIA was intended to cure that affliction.Yet here, an asset was revoked, awarded, and developed—all without a valid statutory foundation.
“If I am a lender reviewing a $200 million reserve-based lending facility, I need to know that the borrower’s title cannot be undone by a 2020 letter that didn’t comply with the law,” a Lagos-based project finance director said. “This judgment actually helps me. It tells me that if title is properly acquired and held, the courts will protect it.”
In that sense, the Dawes Island judgment is not a liability for Nigeria’s investment climate. It is an asset.
The Unanswered Questions
As the appellate process unfolds, several questions remain unanswered by those who have most loudly condemned the Court:
a. If the 2018 petition was the basis for revocation, why was Eurafric never notified or granted a right of reply?
b. If the farm-out agreement was unsigned, what legal instrument authorized Petralon’s entry into the JV?
c. If 62,000 barrels of oil was merely a “test,” why were the proceeds of that test treated as commercial revenue—and where are the reconciled accounts?
d. If the House of Representatives found the award “suspicious,” why has no administrative review been conducted into the decision-making process of 2020?
e. If Petralon is confident in its title, why did it abandon arbitration and pursue administrative allocation instead?
Conclusion: Reform Requires Legality
The “drill or drop” policy is sound. The Project One Million Barrels initiative is laudable. Nigerian independents deserve support.
But reform is not a blank cheque.If the marginal field framework is to command respect—both domestically and internationally it must operate within the boundaries of the Constitution and the governing statutes.
The Federal High Court did not strike down the “drill or drop” policy. It struck down an application of that policy that disregarded due process, ignored JV partner rights, and rested on an administrative petition the other party never saw.
That is not judicial overreach.It is judicial oversight.And in a mature petroleum jurisdiction, oversight is not the enemy of investment.It is the precondition.