Integrated energy major Royal Dutch Shell plc (RDS.A) has agreed to pay compensation to Nigeria’s Bodo community for damages from two oil spill incidents.
The company has accepted responsibility for the operational spills and agreed to shell out £55 million (about $83.5 million) following a three-year legal battle against 15,600 Nigerians.
Shell said it would make individual payment to each claimant who accepts the settlement agreement. Of the total compensation amount, £35 million is directed toward individual settlements, which would be equally divided among the 15,600 claimants, most of whom are fishermen. The remaining £20 million will be utilized to benefit the overall community through projects like health clinics and schools.
The settlement amount, though higher than the £30 million Shell had originally planned to pay, is significantly less than the £300 million demanded by the affected community.
The oil spills came from the Trans Niger Pipeline operated by Shell. The company initially estimated the spill to be approximately 4,000 barrels, while petitioners claimed leakage of 500,000 barrels of oil. Later, however, Shell accepted that spillage could have been higher and will now start a clean-up phase.
Shell owns one of the largest integrated oil and gas businesses in the world. Since the last few years, Shell’s energy establishments in Nigeria have come under a string of attacks from the country’s main militant group. These have forced the company to scale down local operations by selling assets regularly. Therefore, Shell will have to substitute the lost reserves and production units with new ones.
Moreover, with crude prices tumbling over 50% since Jun 2014, Royal Dutch Shell’s upstream division has been able to extract less value for their products.
In keeping with these views, Shell currently carries a Zacks Rank #5 (Strong Sell).
Better-ranked stocks include Seadrill Partners LLC (SDLP), QEP Midstream Partners, LP (QEPM) and Cheniere Energy Partners LP. (CQP), each sporting a Zacks Rank #1 (Strong Buy).
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