Royal Dutch Shell will pay out 55 million pounds ($83.4 million) in compensation for two oil spills in Nigeria in 2008 after agreeing upon a settlement with the affected community.
The largest ever out-of-court settlement relating to oil spills in Nigeria is a step forward for the oil-rich Niger Delta region that has been hit by regular environmental damage, but it is tiny compared with the billions in compensation and fines BP had to pay after the Macondo rig disaster in the Gulf of Mexico in 2010.
Though significantly higher than the 30 million pounds Shell had previously said it would be willing to pay, it's far from the 300 million pounds-plus originally sought by the Bodo community in the Niger Delta.
The payment will be split, with 35 million pounds shared evenly among 15,600 Bodo individuals and the remaining 20 million pounds set aside in a trust fund for projects such as health clinics and schools, said Martyn Day, senior partner at Leigh Day, the British law firm acting for the community.
The individuals will each receive about 2,200 pounds, equivalent to a little more than 600,000 naira ($3,249), in the first such case to pay compensation directly to individual community members, Day said.
Previous similar claims have tended to go through Nigerian authorities, resulting in a disbursement to community chiefs, who were then expected to distribute the money.
"It's very unusual to have thousands benefit," Day said. "The money will go directly to their bank accounts, and this will hopefully be a model for future claims."
Armed gangs tapping pipelines have often been blamed for leaks in the region, but Shell accepted that the Bodo spills were caused by corrosion.
"From the outset, we've accepted responsibility for the two deeply regrettable operational spills in Bodo," said Mutiu Sunmonu, managing director of Shell Petroleum Development Co., the oil company's Nigerian joint venture. "We've always wanted to compensate the community fairly and we are pleased to have reached agreement."
It is estimated by Leigh Day that the locals, mainly fishermen, have lost up to 300 pounds a year each on average since the spills.
Claimants said that the two pipeline spills resulted in the leakage of 500,000 barrels of oil, with Shell initially estimating the volume at 4,000 barrels. It subsequently accepted that the total might have been higher, though it did not provide a final figure.
Shell said a major remediation operation would take place in the coming months, following an initial cleanup phase, but it did not disclose how long this would take nor what it would cost.