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Shell Nigeria case may temper Big Oil policies

Reuters

Thu Jun 18, 2009 5:17pm EDT

By Rebekah Kebede – Analysis

NEW YORK (Reuters) – Royal Dutch Shell’s (RDSa.L) cash payment of $15.5 million — roughly four hours of its 2008 profits — to settle a human rights case in Nigeria may not be enough to change Big Oil’s policies in the developing world.

A better incentive may be a desire to avoid the high legal costs and the bad publicity from the 13-year case accusing Shell of abuses in the Niger Delta region.

The suit involved incidents including the 1995 hangings of author and environmental activist Ken Saro-Wiwa and eight other protesters by Nigeria’s then-military government.

Shell admitted no wrongdoing as part of the settlement. But experts said Big Oil will note the lengthy legal feud that kept international spotlight trained on the oil major as an alleged accomplice in human rights abuses.

Oil companies have a long track record of being accused of human rights and environmental abuses in developing nations like Nigeria,Sudan, Ecuador, Peru and others.

“Many times the most important things about (these claims) is to keep alive the case and keep it focused before the public and before the courts,” said Peter Rosenblum, a professor in human rights law at Columbia University in New York.

The case, settled before it was to go to trial at the U.S. District Court in Manhattan, was brought by victims’ families and the New York-based Center for Constitutional Rights.

Shell insists the charges were untrue and says the evidence would have supported this. It called the settlement a “humanitarian” gesture.

Chevron Corp (CVX.N) was accused of similar violations in Nigeria, but was cleared by a San Francisco court. A case currently being brought against Occidental Petroleum (OXY.N) for its operations in Peru alleges that the company’s oil production damaged the health of nearby communities.

TOKEN GESTURE

Shell’s critics said the settlement is a token gesture amounting to about half a percent of Shell’s record $31.4 billion profit in 2008.

Rosenblum said legal fees and public relations costs for the 13-year case probably far exceeded the settlement sum and Shell likely wanted to end the “beating” its reputation took in connection with the accusations.

After the suit was launched, Shell increased involvement in development activities in the Niger Delta, including partnering with local non-profits and providing micro-credit loans, experts said.

Shell also signed on to the United Nations Global Compact, a voluntary set of standards on human rights, environmental standards, labor and anti-corruption.

Other companies have taken similar steps in response to human rights and environmental scandals. 

Talisman Energy Inc (TLM.TO) sold its interests in Sudan’s largest oil field in 2003 after a suit accused it of giving the government resources to fuel the protracted civil war.

Talisman’s chief executive has since said it will not operate in regions where it does not have the support of the local community. Prior to the accusations, the company had already adopted the UN Global Compact, and funded schools, hospitals and other social programs in southern Sudan.

“Given the recent number of high-profile lawsuits targeting the oil industry, it’s highly likely that the companies will not only pay attention to the public relations implications but also, indeed, continue to adopt practices that meet international standards for human rights and environmental protection,” said Matthew Chen, a researcher at the Baker Institute at Rice University.

Among oil giants, BP Plc (BP.L) and Total SA (TOTF.PA) are participants in the Global Compact, although Chevron Corp (CVX.N), ConocoPhillips (COP.N) and Exxon Mobil Corp (XOM.N) are not.

(Additional reporting by Jeff Jones in Calgary and Braden Reddall in San Francisco; Editing by Matthew Robinson and David Gregorio)

© Thomson Reuters 2009 All rights reserved

REUTERS ARTICLE

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