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Royal Dutch/Shell told to pay compensation

Financial Times: R Dutch/Shell told to pay compensation

“Nigeria accounts for about 10 per cent of Shell’s production but the company’s position is seen as increasingly precarious”

By Michael Peel, FT.com, Aug 26 2004 11:40

Nigeria’s Senate has ordered Royal Dutch/Shell, the oil company, to pay $1.5bn compensation for environmental damage allegedly caused by exploration and production in the violent and polluted Niger Delta region.

The call, which comes after a similar but still unenforced recommendation by a judicial panel set up by the parliament’s lower house last year, demands a $1bn payment by Shell “forthwith” for problems including “severe health hazards”, “economic hardship” and “avoidable deaths”.

Nigeria accounts for about 10 per cent of Shell’s production but the company’s position is seen as increasingly precarious after an internally-commissioned report last year suggested social problems related to the oil industry, bad governance and corruption could force it out of onshore production by 2008.

The Senate motion, which was passed on Tuesday, calls on Shell to make the damages payment to members of the Ijaw ethnic group for spillages in the modern-day state of Bayelsa since the company began operations there in 1956.

The Senate calls on Shell to pay the balance of the $1.5bn in annual instalments of $100m and mandates the Senate’s committees on petroleum resources and the Niger Delta to ensure compliance. The motion seems to add force to the previous recommendation by the judicial panel, which was set up by the House of Representatives in response to a petition submitted in 2000 by a group known as Ijaw Aborigines of Bayelsa State.

Olusegan Obassanjo, the president has made no statement yet on whether he would support the recommendation, and no mention is made of what sanctions could be imposed on Shell if it refused to meet the claim.

Shell and other oil multinationals are heavily criticised by communities and rights group across the Delta, but both the companies and the highly-indebted government have ambitious plans to expand Nigeria’s crude production and reserves. Nigeria accounts for the bulk of Shell’s African reserves, which amount to about 2.4bn barrels out of a global reserves total of 14.35bn barrels. Shell said the Senate had not informed it of the motion and said its response would be to submit the same point-by-point rebuttal it issued to the House panel last year.

“Nothing has really changed,” the company said. “What the Senate did was to dust off the recommendations made by the House of Representatives, to which we had already responded.”

Shell said its lawyers would examine the legal status of the Senate motion.

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