Bloomberg: Shell Sues Total for $190 Million Over Depot Blaze (Update1)

By Megan Murphy

(Bloomberg) — Royal Dutch Shell Plc’s U.K. unit filed a $190 million negligence lawsuit against Total SA over a 2005 fuel depot fire north of London.

Shell claims that Total and the depot’s operator, Hertfordshire Oil Storage Ltd., allowed one of the tanks on the site to overflow, creating a dangerous “vapor cloud” that later ignited. The blaze, at the Buncefield Terminal in Hemel Hempstead, eventually engulfed more than 20 tanks, damaging pipeline systems owned by Shell and other energy companies.

Shell says it has cut its supply of aviation fuel to London’s Heathrow, Gatwick and Luton airports because of the accident, which may cost it as much as $70 million in the next six years. The Hague-based company also claims it may lose around $110 million on reduced ground fuel sales by the end of 2012.

The lawsuit was filed at the High Court in London on April 20. Total and Hertfordshire Oil Storage, a joint venture between Total and U.S.-based Chevron Corp., are already facing hundreds of million of pounds in damages claims over the blaze, many of which are in the process of being settled through court-ordered negotiations. Thousands of those have been filed by nearby residents and businesses.

“HOSL has recently received a number of formal claims including from Royal Dutch Shell in relation to the Buncefield incident, in line with the litigation timetable deadline set by the court in November 2006,” Total and Hertfordshire said in a statement yesterday. “At this time, liability for the incident has not been established or admitted and the final Health and Safety Executive report is still awaited.”

Reactions

Shell, Europe’s largest oil company, claims that the gauge used to monitor the overfilled tank repeatedly “stuck” in the two months preceding the fire, giving inaccurate readings on the amount of fuel it actually contained. Depot employees also failed to react properly when the tank received a large shipment of motor fuel on the evening of Dec. 10, 2005, causing around 410,000 liters to escape, Shell says.

“The staff on duty at the HOSL site caused and/or permitted Tank 912 to be filled so that it reached and exceeded its absolute physical capacity,” according to the claim. “At approximately 05:20 hours on 11 December 2005, the fuel in Tank 912 began to overflow.”

Less than an hour later, a large fuel vapor cloud ignited, triggering a series of explosions, according to the lawsuit. Firefighters battled the Buncefield blaze for more than 24 hours. While more than 40 people were injured, there were no fatalities.

Lower Profit

Total, Europe’s third-largest oil company, today reported an 11 percent drop in first-quarter profit, citing a weaker dollar and lower energy prices. Chief Financial Officer Robert Castaigne said the company won’t meet an earlier target of 6 percent output growth this year.

Shell yesterday reported an unexpected increase in first- quarter profit on a surge in revenue from refining crude and making chemicals.

The Buncefield complex handled around 8 percent of the total U.K. oil supply to the market, including 40 percent of the demand for fuel at Heathrow airport, Europe’s busiest. In addition to Shell, BP Plc and the British Pipeline Agency also operated fuel storage and pipeline systems within the site.

Shell claims the 2005 blaze consumed nearly 18 million liters of aviation fuel it was storing at the terminal and cut off its fuel supply to London airport customers for three months. The company is still only able to supply reduced volumes at increased costs, according to the lawsuit.

The case is Shell U.K. Ltd. v. Total U.K. Ltd. and Hertfordshire Oil Storage Ltd., 2007 Folio 491.

To contact the reporter on this story: Megan Murphy in London at [email protected] .

Last Updated: May 4, 2007 07:22 EDT

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