Royal Dutch Shell PLC (RDSB.LN) 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.
Royal Dutch Shell PLC (RDSB.LN) 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 (BP) 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. (CVX) 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.
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