PREVIEW
Legal battles proliferate over pollution and tax as government braces for oil decline
As the pandemic recession and the push for a green energy transition hasten the winding down of the hydrocarbon economy, big oil companies are contending with falling profits and a raft of lawsuits in western courts. Many of the cases are being fought around production in Africa and Asia where companies are accused of exploiting lax regulatory systems.
Most of them are about citizens hit by environmental despoliation or contractual disputes between resource companies and the state authorities. The continuing salvos between Nigeria and Shell cover all the bases.
Pressure over revenues is on both sides. A new report by the Natural Resource Governance Institute calculates that national oil companies in Algeria, Congo-Brazzaville, Mozambique and Nigeria are investing $400 billion in oil projects that will not break even by 2030 if industrial economies meet international obligations for cutting carbon emissions.
Oil-producing countries are reviewing contracts with the multinationals, aiming to pull in more investment over the next decade in what might be the industry's last gasp.
Legal fights will hamper those efforts for the most part. Often, they are three-cornered: the citizens and complainants; the international oil company; and the national government which is a co-shareholder with the oil company in local production.
On 12 February, Britain's Supreme Court ruled that 42,500 fishermen and farmers from the Ogale and Billie communities could sue Royal Dutch Shell for the failure of its subsidiary SPDC to clean up multiple pipeline leaks in the Niger Delta. The case brought by London law firm Leigh Day sets a common law precedent that will also apply in Australia, Canada and New Zealand.
As the biggest foreign oil producer in Nigeria, Shell is a favoured target of campaigners but all of its operations partner either with the state-owned oil company or other multinationals or both.
SPDC operates pipelines across the Delta: it is owned by the Nigerian National Petroleum Corporation (55%); Shell (30%); France's Total (10%); and Italy's ENI (5%). Two weeks earlier Shell lost a case in Dutch appeal courts which again held it liable for leaking pipelines.
None of the litigants are putting a figure on the damages which could be decided in a trial. Shell and the other companies may prefer to settle out of court. Shell paid over $80 million in an out-of-court settlement in 2015 to the Bodo community for two oil spills.
At the time, it was the biggest settlement ever agreed for oil spills in Nigeria but activists expect a better offer after the latest court ruling in London. After the 12 February ruling, Shell's chief executive Ben van Beurden said the company would take another hard look at its onshore production in Nigeria. That probably means selling more assets (AC Vol 61 No 25, Unbalancing the books & AC Vol 61 No 20, How to make oil pay).
Copyright © Africa Confidential 2024
https://www.africa-confidential.com:1070
Prepared for Free Article on 22/11/2024 at 13:04. Authorized users may download, save, and print articles for their own use, but may not further disseminate these articles in their electronic form without express written permission from Africa Confidential / Asempa Limited. Contact subscriptions@africa-confidential.com.