Shell now liable for acts of its Nigerian subsidiary

A Dutch appeals court ruled on Friday that Royal Dutch Shell may be held liable for oil spills at its subsidiary in Nigeria, potentially opening the way for other compensation claims against multinationals in the Niger Delta and elsewhere.

The ruling was hailed by rights groups as a victory for victims of environmental pollution worldwide, while Shell said it was disappointed.

Judges in The Hague ordered Shell to make available to the court documents that might cast light on the cause of the spills and whether leading managers were aware of them.

A lower Dutch court in 2013 had found that Shell's Dutch-based parent company could not be held liable for leakages of oil at its Nigerian subsidiary.

The legal dispute dates back to 2008 when four Nigerian farmers and campaign group Friends of the Earth filed suit against the oil company in the Netherlands, where its global headquarters is based.

"Shell can be taken to court in the Netherlands for the effects of the oil spills," the court stated on Friday. "Shell is also ordered to provide access to documents that could shed more light on the cause of the leaks."

The court still has to decide if Royal Dutch Shell is in fact responsible for the Nigerian spills. The court will continue to hear the case in March 2016.

Judge Hans van der Klooster said the court had also found that it "has jurisdiction in the case against Shell and its subsidiary in Nigeria".

Shell's Nigerian subsidiary, Shell Petroleum Development Company of Nigeria Ltd (SPDC), said in a statement: "We are disappointed the Dutch court has determined it should assume international jurisdiction over SPDC."

"We believe allegations concerning Nigerian plaintiffs in dispute with a Nigerian company, over issues which took place within Nigeria, should be heard in Nigeria," it said.

UNIQUE RULING

Shell has always blamed the leakages on sabotage which under Nigerian law would mean it is not liable to pay compensation. But the Dutch court said on Friday: "It is too early to assume that the leaks were caused by sabotage."

"The ruling is unique and can pave the way for victims of environmental pollution and human rights abuses worldwide to turn to the Netherlands for legal redress when a Dutch company is involved," Friends of the Earth Netherlands said in a statement.

In January 2013, the district court in The Hague ruled that one of the farmers in the original suit was eligible for compensation from Shell's Nigerian division for spills on his land in the Niger Delta, the heart of Nigeria's oil industry.

The farmer appealed over whether the parent company should also be liable.

In a separate case, Shell agreed in January to pay out 55 million pounds ($82 million) in out-of-court compensation for two oil spills in Nigeria in 2008 after agreeing a settlement with the affected community in the Delta.

(This story removes erroneous reference to overturning of 2013 ruling, par 2)

(Additional reporting by Anthony Deutsch; editing by Richard Balmforth)

Source: Reuters

Nigerian government proposes new Bill to reform State oil company

Nigeria's government is breaking up an all-encompassing oil bill that has been stuck in parliament for years, replacing it first with a law to overhaul the state sector which aims to close loopholes that bred corruption, according to a draft seen by Reuters.

Under the draft legislation, the Nigerian National Petroleum Corporation (NNPC) which is the State's oil company will be split in two - rather than a series of units as envisaged by the stalled 2012 bill - including a National Oil Company that will be run on commercial lines and partly privatized.

Africa's biggest oil producer has been trying to pass a new oil law for years but lawmakers have never agreed on every aspect of the 200-page Petroleum Industry Bill (PIB), particularly the aspects on taxation and host community funds.

In November, Kachikwu, the head of the NNPC said the government was working on a new PIB that would probably be passed in sections, particularly the thorny issue of a new tax regime that has been criticized by major international oil firms.

The first new bill, drafted by the Senate and overseen by the oil ministry, is entitled "Petroleum Industry Governance and Institutional Framework Bill 2015" and aims to create "commercially oriented and profit driven petroleum entities".

It is expected to be presented to senators this week.

The bill repeals the act that created NNPC that contained legal gray areas that allowed mismanagement to go unchecked and billions of dollars in revenues to go seemingly unaccounted for as operating costs rocketed.

"The bill will be the first statutory reform of the NNPC since its establishment in 1977, and if passed into law, will be crucial to ushering in a new oil company that can fulfill its responsibilities and obligations both to the country and to its JV partners," Harrison Declan, a Lagos based energy lawyer said.

Under the Nigerian constitution, NNPC is supposed to hand over its revenues to the federal government, which then returns what the firm needs to operate based on a budget approved by parliament. However, the act establishing the state firm allows it to cover costs before remitting funds, in effect enabling it to do what it wants with the cash.

The institutional changes in the new draft have been greatly simplified from the 2012 PIB that created many new regulators and broke up the oil company into separate downstream (refining and retail), upstream oil and gas companies.

Instead, NNPC will be split into two: the Nigeria Petroleum Assets Management Co (NPAM) and a National Oil Company (NOC).

REMOVING STATE OBSTACLES

The NOC will be an "integrated oil and gas company operating as a fully commercial entity", the document states, and will run like a private company.

The onus will be on its board to make profits and raise its own funding. The NOC will keep its revenues, deduct costs directly and pay dividends to the government, although the bill does not elaborate on the details.

In theory, trimming NNPC down into two leaner companies could solve a chronic funding problem. Part of Nigeria's oil output comes from joint ventures with foreign and local companies in which NNPC holds the majority stake. However, NNPC is always behind on covering its share of costs owing to the slow pace of government approvals.

To start off, the NOC will receive about $5 billion, or at least the five-year average of the amount of money NNPC had to put into joint venture operations. In October, NNPC estimated it owed around $6 billion to oil companies.

The new NOC will also be partially privatized. At least 30 percent of NOC shares will be divested within six years of its incorporation.

NPAM is expected to manage assets "where the government is not obligated to provide any upfront funding". These include oil licenses run under production-sharing agreements in which independent oil companies cover operating costs and pay tax and royalties on output.

Compared with previous PIB drafts, the law curtails ministerial powers as board appointments are made by the Nigerian president and confirmed by the Senate.

If passed, the law would also create a Nigeria Petroleum Regulatory Commission (NPRC) to oversee everything from oil license bid rounds to fuel prices. Previously, regulation was split between many bodies with ill-defined roles, leading NNPC to act in part as its own watchdog in a conflict of interest.

A Special Investigation Unit would also be set up under the NPRC with the powers to seize items and make arrests without a warrant.

Sourced from Reuters