Shell Disagrees with $5B Fine for Nigeria Oil Spill

Shell Disagrees with $5B Fine for Nigeria Oil Spill

LONDON - Royal Dutch Shell PLC could face a record $5 billion fine from authorities in Nigeria for an oil spill off the coast of the West African country last year, an amount that dwarfs similar fines in the U.S. and Brazil.

Shell pushed back hard against the penalty, proposed by federal authorities seven months after some 40,000 barrels of oil leaked at Shell's Bonga offshore facility.

"We do not believe there is any basis in law for such a fine," said a Shell spokesman. "Neither do we believe that Shell Nigeria Exploration and Production Company has committed any infraction of Nigerian law to warrant such a fine."

The large penalty comes at a time of heightened concern over the safety of offshore oil production, following BP PLC's disastrous Deepwater Horizon explosion and oil spill in the Gulf of Mexico in 2010. Shell is currently facing intense scrutiny from U.S. authorities and environmental groups as it prepares to drill for oil offshore Alaska.

The fine is particularly severe in comparison to other recent incidents. Based on Shell's estimate of the 40,000 barrels of oil spilled in the Bonga leak, the fine equates to around $125,000 a barrel.

By comparison, BP could face a fine under the clean water act for the Deepwater Horizon spill of up to $1,100 a barrel if it isn't found guilty of gross negligence, or $4,300 a barrel if gross negligence is proved.

U.S. oil company Chevron Corp. could have to pay between $8,000 and $10,000 a barrel for its spill of 3,000 barrels of oil offshore Brazil, according to recent comments from that country's regulator.

The ultimate size of the fine will still have to be approved by a committee of Nigerian lawmakers, who Monday heard submissions from the National Oil Spill Detection and Response Agency, or NOSDRA, on what an appropriate penalty would be, according to local media reports. NOSDRA will have to justify to the House Committee on the Environment why Shell should pay such a large amount.

Nigerian lawmakers were told to consider imposing the fine Monday by Peter Idabor, head of NOSDRA, according to local media reports. Mr. Idabor defended the decision, saying the $5 billion penalty was consistent with similar fines in other oil producing countries like Venezuela and Brazil, the Vanguard newspaper reported.

If lawmakers decide to endorse Mr. Idabor's recommendation, the fine will be the largest ever imposed on Shell. Even in Nigeria, where the firm has pumped commercial oil since the 1950s, Shell's biggest charge to date was a $40.5 million court-imposed fine for a series of spills in Ogoniland dating back to the 1970s.

Shell was forced to halt production from the 200,000 barrel-a-day Bonga field in December after a leak occurred during a routine tanker loading operation. The result was one of Nigeria's worst oil spills in more than a decade.

However, Shell claims that none of the crude reached land and that much of the leaked oil dispersed naturally in the water or evaporated. Some crude did wash up along the Western Niger Delta coastline, which Shell cleaned up, despite expressing doubts that it originated from Bonga.

"[Shell] responded to this incident with professionalism and acted with the consent of the necessary authorities at all times to prevent an environmental impact," the company spokesman said.

Copyright (c) 2012 Dow Jones & Company, Inc.


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Alfie | Jul. 22, 2012
As long as the money goes to the clean up and restoration of peoples livelihood and not squirreled off to some secret bank account in Switzerland, Barbados or elsewhere under the name of some top official in Nigeria. Remember the culture that exists there. The oil companies were complicit in the support of that culture. Now it is biting then in the bum. Poor souls, my heart bleeds....

Uzoma | Jul. 21, 2012
The fine fee is Outrageous, plus a country like Nigeria where corruption has eaten into the soul of the government a bulk of that money will go into the pockets of corrupt government officials. I sympathize with the people affected but the fee is too much.

Mee | Jul. 20, 2012
I would think Shell would pay them after all the years of drilling in their country for so long why not pay them and 5 Billion is just a drop in the pocket for Shell. I seen a documentary on Shell drilling there killing the Nigerians food source there in their country and I think Shell should pay them.

Ark cleaners ltd | Jul. 20, 2012
I have a problem with this fine although I dont know how the figure is arrived at. The challenge I have is our law makers and some strong politicians will just eat up this money Shell will pay and use it for their own use. God help us

Nauman Khurram | Jul. 18, 2012
If Shell had responded to this incident with the consent of the Nigerian authorites and was able to prevent environment impact then there is no justificaton of imposing this undue fine on the Company.

Ilidio Franco Santos | Jul. 17, 2012
What this and other incidents tell us is that there is a serious need, which is dragging its feet on the old ways of business as usual, of oil companies to change management behavior and be more forward thinking. Sustainable development is financially sound. Embracing environmental performance, social performance, technical performance, financial performance... is, obviously, efficiency applied. What unfortunately we are seeing is the result of short sighted, self interest of some managers who can only think of today, without considering tomorrow. When we are opening up new exploration areas in pristine corners of our wonderful world, like the Arctic, we need top management to change the mindset from a unique value - the share value - to be more encompassing and holistic, adding REAL concern for Health, Safety and Environmental issues, and not just paying lip service to it, as has been the norm up to now.

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