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Shell faces £830m Nigeria claim

London Evening Standard: Shell faces £830m Nigeria claim

“The FSA’s conclusions will raise questions about the part played by Watts’ predecessor, Sir Mark Moody-Stuart, chairman between 1997 and 2001.

Steve Hawkes,

25 August 2004

ANGLO-DUTCH oil giant Shell suffered yet another blow today after it emerged the group could face a lengthy court battle over a $1.5bn (£833m) environmental compensation claim in Nigeria.

The Nigerian Senate, the country’s controversial upper house, passed a resolution asking Shell’s Nigerian unit to compensate oilfield communities in the Niger Delta for pollution.

Its move came as Shell struggled to shake off fresh controversy over its reserves scandal following yesterday’s damaging reports by regulators on both sides of the Atlantic.

The US Securities and Exchange Commission and the Financial Services Authority indicated executives may have known about the overbooking of oil and gas discoveries as far back as 1998.

Their findings, issued alongside confirmation of £82m of market abuse fines, also overshadowed a commitment by Shell to up North Sea exploration and production spending.

The group said it was not aware of the Nigerian Senate’s resolution. ‘The resolution has not been communicated to Shell Nigeria,’ a spokeswoman said. She added it would only be binding ‘if the law backs it’.

But a source at the company admitted the case would probably end up in the courts.

Shell has been hit by a string of environmental disputes with the Ijaw tribe, which accuses the group of allowing its crude oil to spill into rivers and swamps of the Niger Delta.

Shell ‘strongly contested’ the claims two years ago at a public hearing in Nigeria’s House of Representatives and has often blamed spills on saboteurs hoping to steal the oil to raise cash.

The row threatens to disrupt a charm offensive from Shell chairman Jeroen van der Veer as he looks to keep investors at arm’s length while considering an unprecedented shake-up of the group’s corporate structure.

Analysts will be posing more questions after yesterday’s detailed reports from the SEC and the FSA. The FSA said Shell’s auditors, KPMG and PricewaterhouseCoopers, had doubts about its reserves six years ago.

Shell came clean about its overbooking of oil and gas discoveries only in January, wiping 4.7bn barrels from its ‘proven’ portfolio. Three executives, including chairman Sir Philip Watts, lost their job.

At the time, industry insiders believed Shell’s executives were first made aware of the overbooking by an internal memo in 2002, which said its reserves were no longer in line with SEC guidelines.

The FSA’s conclusions will raise questions about the part played by Watts’ predecessor, Sir Mark Moody-Stuart, chairman between 1997 and 2001.

Shell today said it would increase exploration and production spend in Europe by $150m to $1.8bn this year, including the amount going on its Goldeneye gas field in the UK.

Shares in the group slid 3 1/4p to 393 1/2p.

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