Shell launches arbitration case over oil spill claims by community in LNG-producing nation of Nigeria

Monday, 15 February 2021
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Royal Dutch Shell, the largest equity shareholder in Nigeria LNG, has launched arbitration proceedings against the Nigerian Government over a long-running community dispute involving contested claims about oil spills dating back many years.

Shell’s Netherlands-registered holding company filed a case for arbitration at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington DC on the 10th of February 2021.

Shell brought its World Bank arbitration case under the bilateral investment treaty between the governments of the Netherlands and Nigeria.

The decision follows the Anglo-Dutch company’s unsuccessful efforts in 2020 to reverse a court order instructing Shell to pay compensation to a community for polluting its land.

While the case’s victors say they are now owed more than 183 billion Nigeria naira ($479 million), Shell contests that valuation and denies even being responsible for the decades-old oil spill disputes.

Shell has said that given the history of this particular case, it was seeking protection of its legal rights from an international tribunal.

All of Shell’s appeals against the ruling have been dismissed, most recently by Nigeria’s Supreme Court in November 2020.

Shell operates the oil block at the heart of the dispute, which is known as Oil Mining Lease 11, in a joint venture with the Nigeria National Petroleum Corp., France’s Total and Italy Eni.

The same companies own Nigeria LNG using resources under seperate licences with current stakes being NNPC (49 percent), Shell (25.6 percent), Total (15 percent), and Eni (10.4 percent).

The OML 11 licence area has been the subject of prolonged litigation between the Ejama-Ebubu community in Tai Eleme Local Government Area of Rivers State located in the eastern part of the Niger Delta and Shell, the operator of the oil concession on behalf of the joint venture partners.

The roots of the litigation have been allegations by the community of a huge oil spill many years in the past, which they claimed was traced to a ruptured oil pipeline that belonged to Shell.

The Anglo-Dutch company has always denied responsibility for that incident.

As far back as 2001, Ejama-Ebubu community representatives again filed an application at the Nigerian Federal High Court for compensation for “a major crude oil blow-out and spill involving over two million barrels of oil”, resulting in the pollution, environmental devastation and destruction of property belonging to individuals and families in the area.

Shell has argued that oil spills in the Niger Delta over the last 20 years have been a result of sabotage, crude oil theft or illegal refining and that the company itself has cleaned up the mess regardless of the cause.

On the day before the Nigerian arbitration case was filed in Washington, Shell held a Web conference outlining its strategy to accelerate its transformation into a provider of “net-zero emissions” energy products.

“We will continue with short-term targets that will drive down carbon emissions as we make progress towards our 2050 target,” added Shell.

However, the company stated that it also expected a gradual reduction in its global oil production of around 1-2 percent a year, including divestments and natural decline.

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