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MarketWatch: Shell won't pay Nigeria environmental damages pending appeal

MarketWatch: Shell won't pay Nigeria environmental damages pending appeal


May 22, 2006


By Spencer Swartz and Vincent Nwanma



LONDON (MarketWatch) — Royal Dutch Shell (RDSA) isn't going to meet a Nigerian court-ordered deadline of Monday and pay $1.5 billion in environmental compensation damages to local communities because of the company's appeal on the long-simmering matter, a Shell spokesman in Nigeria said Sunday.


Anglo-Dutch Shell has appealed a decision handed down Friday by the Federal High Court in Port Harcourt, the main oil city in Nigeria, that ordered the company to pay money to ethnic Ijaw communities in the Niger Delta.


“We are not paying any money yet due to our appeal,” the spokesman, speaking on behalf of Shell Petroleum Development Company of Nigeria, told Dow Jones.


A Shell spokeswoman in London reiterated that the company had appealed Friday's court decision.


The SPDC is a joint-venture with state-run Nigerian National Petroleum Corp., which has a 55% stake in the company.


Shell is the operator of the SPDC and has a 30% interest in the company. French oil giant Total SA (TOT) holds a 10% stake, while the remaining 5% is held by Agip SpA (AGI.YY), a unit of Italian energy giant Eni SpA (E).


Ijaw communities that dominate the delta, an impoverished England-sized area with a population of around 20 million, have long accused Shell of permitting oil spills that have polluted waters and killed vegetation and fish in the area.


Shell, the biggest Western oil company operating in Nigeria, has rejected this and said many past oil spills in the delta, dotted with swamps and rivers, have been caused by illegal bunkering in which vandals puncture pipelines to steal oil that they later sell.


The bunkering trade is often operated with the tacit support of some local politicians and, at times, with help from members of the Nigerian Navy.


Oil bunkering is estimated to have caused Nigeria to lose up to 300,000 barrels a day of oil, at peak moments, and millions of dollars in government revenues.


The Federal High Court in Port Harcourt on Friday ordered Shell to deposit the money into an escrow account with the Central Bank of Nigeria by noon local time on Monday.


Shell already has appealed a ruling in February that upheld a Nigerian parliamentary resolution from three years ago that said Shell should pay money to Ijaw communities in Bayelsa State, one of three main oil-producing states in the delta.


Shell has argued that the Nigerian government should be liable for the bulk of any eventual payment if the companies end up losing the case because of the government's majority-stake in the Shell Petroleum Development Co.


The other companies in the SPDC venture should pay according to their stakes in the company, Shell has said, if they lose the case.


Militant groups, led by the Movement for the Emancipation of the Niger Delta, or MEND, have attacked oil and gas facilities in the delta over the past six months that have cut almost a quarter of Nigeria's typical daily output. Most of the attacked facilities belong to Shell.


MEND has demanded a $1.5 billion payment from Shell in environmental compensation.


MEND, an unknown coalition of groups several months ago that quickly gained stature among delta locals because of its firepower and relative cohesion, is also demanding more control over oil resources and the release of two Ijaw leaders imprisoned on money-laundering and treason charges.


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