Shell To Challenge $5 Billion Fine For Nigerian Oil Spill

July 18, 2012Nigeriaby EW News Desk Team

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Royal Dutch Shell PLC have been slapped with a record $5 billion fine for environmental damaged caused by an oil spill in Nigeria’s Bonga field last year, reported the Wall Street Journal on Tuesday, though company representatives now insist that there was no legal basis for the fine.

The spill, which happened last December, had occurred after a routine tanker loading operation caused a leak – forcing the company to shut down its 200,000 barrels per day (bpd) Bonga facility, just 120 km off the Nigerian coast.

But while the leak led to nearly 40,000 barrels of oil spilling into the Atlantic Ocean, Shell representatives insisted that everything had been done to prevent over-excessive environmental damage; and claimed that the the spill was contained before it reached the shore.

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

"SNEPCO (Shell Nigeria Exploration and Production Company) responded to the incident with professionalism and acted with the consent of the necessary authorities at all times to prevent environmental impact as a result of the incident," added SNEPCO’s spokesman Tony Okonedo to AFP.

Needless to say, Shell’s opposition to the fine has sparked fury among Nigerian regulators.

“Are they denying that they spilled 40,000 barrels of crude oil into the waters?" asked the head of Nigeria's National Oil Spill Detection and Response Agency, Peter Idabor, in an interview with BBC’s Focus on Africa Programe.

"Although adequate containment measures were put in place to combat the Bonga oil spill, it however posed a serious environmental threat to the offshore environments," noted Idabor.

"The people could not fish after a long period after the spill," Idabor added.

"So that's why we are looking at the damages. If the people said they will not pay, so be it. But we want to make it very clear that it's wrong for them to say they cannot pay,” he later said.

According to the Wall Street Journal’s calculations, the $5 billion fine levied by Nigeria would equate to around $125,000 for every barrel of oil spilled. Comparatively, BP will only face a $4,300 a barrel fine for the Deepwater Horizon spill in the Gulf of Mexico if gross negligence is proved, while Chevron Corp will have to pay between $8,000 and $10,000 a barrel for its spill of 3,000 barrels off Brazil.

Related: Shell Understated Nigerian Oil Spill Damage By More Than 60 Times: Report

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Audrey Gaughran, an expert on Shell’s operation in Nigeria with Amnesty International, applauded the fine, but cautioned Nigeria that they would have to specify the justification for the penalty, including whether negligence by Shell led to the spill.

"There is very little guarantee that it won't happen again because it's not yet clear what happened in the first place," Gaughran said.

"What we want Nigeria to tell is, 'who did the investigation and exactly what went wrong?’” she added.

Gaughran also expressed concern that Nigeria’s investigative body, with its limited capacity, has previously been unable to establish that some spills were caused by the failure of major oil companies to properly maintain and manage their equipment. Often, she explained, oil companies were charged with investigating the incidents themselves.

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