Energy giant, Shell plc which has planned to divest its shallow water and onshore assets in Nigeria may face new hurdles as a judge has ordered for a resolution of an oil spill case it is involved in before the deal can progress.
The sale of its Nigerian assets will be postponed until a court rules on the company’s appeal of the N800bn penalty awarded against Shell by an Owerri High Court.
According to Mohammed Ndarani Mohammed, a lawyer for the plaintiffs, the order was issued on March 11 by a Federal Appeal Court in Owerri.
Ndarani said the three-judge panel also ordered Shell to deposit the judgment sum in a court-controlled account within two working days, according to a Bloomberg report.
For more than a decade, Shell has been selling onshore and shallow water licences to Nigerian independent producers.
Recall that analysts at WoodMac, an energy intelligence firm, placed the valuation of Shell’s 30 percent equity in the joint venture in Nigeria excluding pipelines and terminals at $2.3billion and raised concern that much of the assets may not be commercially viable because of the lack of investment.
The energy intelligence firm considers only 20 percent of the joint venture resources to be currently commercial due to the absence of investment, crude theft, insecurity, and gas market constraints.
However, the bids by four companies to buy the remaining assets of Shell are put on hold by the court decision.
“Shell is disappointed at this outcome,” according to a spokeswoman for its Nigerian onshore subsidiary, who confirmed the court’s decision.
Read also: Shell’s electric vehicle fleet to rise 500,000 by 2050
“We have a strong belief in the merits of our case and will take immediate legal steps to appeal and stay the decision’s execution until the appeal is resolved.”
In the meantime, a hearing on the appeal is set for May 5.
In January 2020, members of the Ejalawa community in Southern Rivers State sued Shell and its joint venture partner, the state-owned Nigerian National Petroleum Co.
In November 2020, a federal judge agreed that an abandoned flow line operated by Shell began spilling a “large volume of crude oil” in September 2019, causing damage to their land and waterways.
The court ruled that the 88 plaintiffs, who rely on farming and fishing for a living, were entitled to compensation in the amount of N800 billion and it ordered Shell to clean up.
Meanwhile, the amount is far greater than any previous damages awarded by Nigerian courts to residents of the crude-producing region for land degradation.
According to the November 2020 ruling, Shell and the NNPC deny that spills occurred on the alleged dates and claim that the claim against them is “unsubstantiated, vague, and exaggerated.”
They also argued that the judge should not award damages because several required steps were not completed, including a joint investigation of the alleged leak and a volume assessment.
