Shell Faces Massive Penalty for Nigerian Oil Spills

Shell pollution in the Niger Delta

Royal Dutch Shell faces having to pay compensation of potentially more than N62.5 billion ( $410 million) after it admitted liability for the two spills in Ogoniland, Nigeria following a legal claim brought in the United Kingdom.

The Financial Times reported that the agreement came after a class-action lawsuit was brought in the High Court by the Bodo community in the Niger Delta against Shell and its subsidiary, Shell Petroleum Development Company of Nigeria (SPDC).

A lawyer from the law firm of Leigh Day & Co, Mr. Martyn Day, who represented the Bodo community, said that he was pleased Shell had admitted liability and agreed to concede to the English jurisdiction and court system.

The compensation set to be paid to the 69,000 Nigerians affected by the damage caused by the leaks is thought to be in excess of £250 million.

According to the report, most of those who brought claims are fishermen and typically earn about £3,000 to £5,000 a year on the average.

Another lawyer from Leigh Day & Co, Mr. Daniel Leader, told also said that the Ogoni people also wanted Shell to clean up the area.

“SPDC has formally accepted liability and conceded to have the case heard in the U.K. We will be entering into settlement negotiations that will begin in earnest in the autumn,” Leader said.

Two separate oil spills occurred in the Bodo district of Ogoniland in late 2008, which were said to have resulted in thousands of barrels of crude oil being leaked into nearby rivers and creeks.

He said the spill devastated the livelihood of the local community which relied on fishing to sustain itself.

“First and foremost, the community wants Shell to clean up” the spill affected area. Secondly, compensation in “the tens of millions of dollars will be needed to be paid to the community,” he added.

An unnamed spokesman of the oil giant acknowledged that the two spills were operational and accepted that the company would pay compensation in accordance with relevant laws of the country.

“SPDC has always acknowledged that the two spills which affected the Bodo community and which are the subject of this legal action were operational. As such, SPDC will pay compensation in accordance with Nigerian law. The legal process is continuing and could take several months to reach a conclusion,” he said.

Shell had disputed the claim, saying that a weld broke in September 2008 in the 50-year-old trans-Niger pipeline that takes 120,000 barrels of oil a day at high speed across the region.

However, the spill was not stopped until November 7, 2008, and by that time, as much as 2,000 barrels a day had spilled directly into the water.

A month later in December 2008, the same pipeline broke again in the swamps but Shell did not inspect or repair it until February 19, 2009.

Last year, Amnesty International said an equivalent of at least nine million barrels of oil had been spilled in the Niger Delta over the past half a century, nearly twice as much as the five million barrels spilled in the Gulf of Mexico by the Deepwater Horizon disaster.

Shell said in a recent report that thieves or saboteurs spilled about 103,000 barrels of crude oil from its facilities in 95 incidents in 2009, representing an average of one spill every four days, and accounting for almost 98 per cent of the volume of oil spilled during the year.

The oil giant also said it paid more than $4 million in compensation, as well as providing clean water and food to the affected communities where needed, adding that the Nigerian law does not require payment of compensation in cases of sabotage.

There was a recent concern that a three-year investigation by the United Nations “will almost entirely” exonerate Shell for 40 years of oil pollution in the Niger Delta, as the report blames the oil giant on only 10 per cent of the nine million barrels of oil spilled in the region, claiming that the rest of the spill was caused by sabotage.

The $10 million (£6.5 million) investigation by a team of 100 officials, who had been studying environmental degradation in the oil-rich region at the instance of the UN Environment Programme (UNEP), was paid for by Shell, according to The Guardian of London.