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Shell rejects Nigeria’s $1.5bn damages claim

Business Report: Shell rejects Nigeria’s $1.5bn damages claim

‘According to the senate document, the legal panel reported “uncontradicted evidence” of massive oil spills at Shell facilities in Bayelsa state.’

By Sapa-AFP and Reuters

September 2, 2004

London – Royal Dutch/Shell rejected an order by the Nigerian senate yesterday for the oil giant to pay $1.5 billion (R9.96 billion) in compensation for damages caused in the Niger Delta, saying it had no legal basis.

Last week the senate adopted a motion ordering the payment to members of the Ijaw ethnic group for health and economic hardships resulting from oil spills at Shell facilities.

But a Shell spokesperson in London commented: “We believe that due process has not been followed. The reported order to pay compensation has no legal basis.

“In our view, such judgment can only be decided by a court of competent jurisdiction.”

Shell had not been formally notified of the decision by the senate, he added.

The senate based its directive on recommendations from a legal advisory panel convened in response to a petition by the Ijaws, which was filed in December 2000.

Shell contested the claims by the Ijaws in 2002, when a public hearing was held by Nigeria’s house of representatives.

According to the senate document, the legal panel reported “uncontradicted evidence” of massive oil spills at Shell facilities in Bayelsa state.

The panel recommended that $500 million be paid immediately, with the remaining $1 billion spread over a period of 10 years in equal installments, the document said.

Communities in the oil-rich southern Niger Delta region of Nigeria have often accused foreign oil companies, especially Shell, of environmental pollution and destruction of their ecosystem.

Shell shares appeared to shrug off the news, rising 1.2 percent in London on a higher oil price.

Meanwhile, Reuters reports from London that European oil traders said yesterday that Nigeria’s state-owned oil company, NNPC, had issued a buy tender for oil products for delivery into Nigeria during the fourth quarter.

The tender was for petrol and jet fuel, traders said. One trader said it also included a requirement for heating oil. They did not know how many cargoes of each fuel NNPC would import during the quarter.

In the tender for the third quarter this year, NNPC bought 40 petrol cargoes and six jet kerosene cargoes.

The cargoes each contained 30 000 tons of fuel.

NNPC officials were unavailable for comment.

Opec member Nigeria does not produce enough refined oil products to meet domestic demand, relying on imports despite being the world’s seventh largest oil crude oil exporter.

Nigeria’s petrol imports total some $2 billion a year. The government subsidises fuel sales, costing the country nearly half the total import bill.

The petrol that Nigeria buys is low-octane 90 RON material. Suppliers ship most of the petrol imports to Nigeria from the Mediterranean and northwest Europe.

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