Shell To Pay Out £55 Million (US$83 Million) To Settle Nigeria Oil Spill Claims

Filled oil drums are seen at Royal Dutch Shell Plc's lubricants blending plant in the town of Torzhok, north-west of Tver, in this November 7, 2014 (Photo: Reuters/Sergei Karpukhin)

Royal Dutch Shell will pay out £55 million pounds ($83.4 million) in compensation for two oil spills in Nigeria in 2008 after agreeing a settlement with the affected community.

Reuters reports the largest ever out-of-court settlement relating to oil spills in Nigeria is a step forward for the oil-rich Niger Delta region that has been hit by regular environmental damage, but it is tiny compared with the billions in compensation and fines BP had to pay after the Macondo rig disaster in the Gulf of Mexico in 2010.

Though significantly higher than the £30 million pounds Shell had previously said it would be willing to pay, its deal is a fraction of the £300 million pounds-plus originally sought by the Bodo community in the Niger Delta.

The payment will be split, with £35 million pounds shared evenly between 15,600 Bodo individuals and the remaining £20 million pounds set aside in a trust fund for projects such as health clinics and schools, said Martyn Day, senior partner at Leigh Day, the British law firm acting for the community.

The individuals will each receive about £2,200 pounds, equivalent to a little more than 600,000 naira (US$3,249), in the first such case to pay compensation directly to individual community members, Day said.

Effects of oil spill on mangrove in Bodo. (Photo: TheCable)

Previous similar claims have tended to go through the Nigerian authorities, resulting in a disbursement to community chiefs, who were then expected to distribute the money.

“It’s very unusual to have thousands benefit," Day said. "The money will go directly to their bank accounts and this will hopefully be a model for future claims.”

Armed gangs tapping pipelines have often been blamed for leaks in the region, but Shell accepted that the Bodo spills were caused by corrosion.

“From the outset, we’ve accepted responsibility for the two deeply regrettable operational spills in Bodo," said Mutiu Sunmonu, managing director of Shell Petroleum Development Co, the oil major's Nigerian joint venture.

"We’ve always wanted to compensate the community fairly and we are pleased to have reached agreement.”

It is estimated by Leigh Day that the locals, mainly fishermen, have lost up to £300 pounds a year each on average since the spills.

Claimants said that the two pipeline spills resulted in the leakage of 500,000 barrels of oil, with Shell initially estimating the volume at about 4,000 barrels. It subsequently accepted that the total may have been higher, though it did not provide a final figure.

Shell said that a major remediation operation would take place in the coming months, following an initial clean-up phase, but it did not disclose how long this would take, nor how much it would cost.