Report: The Nigerian oil spill compensation regime – obstacles and opportunities

Summary

When a spill takes place, the oil is supposed to be removed and the natural environment restored to its pre-spill state, in a process called clean-up and remediation. Those affected by the spill (for example, because their farmland has been polluted, and crops will no longer grow) should, in theory, also able to claim compensation for damages caused. This is provided for in different ways in Nigerian legislation, and there are a number of impact assessment and claims procedures which are supposed to be followed when a new spill is reported. Together, these are known as the oil spill compensation system.

However, the system is convoluted, slow, and rarely resolves compensation claims to anyone’s satisfaction, if at all. In short, it is not fit for purpose. This is deeply concerning: decades of damage to human and environmental health without remedy have been documented by researchers in the Niger Delta. Meanwhile, the Nigerian state oil company (through which all oil production is ultimately organised) has made clear its intention to aggressively expand the oil industry, with a goal of increasing production by a third to three million barrels a day by 2023. This means there is the potential for significant further damage.

As such, as well as a major improvement in the prevention of oil spills in the first place, the compensation system needs to be made to work much more effectively. Based on interviews with more than 30 stakeholders directly involved in oil spill compensation processes, this report identifies a number of barriers to the implementation of the compensation system.

Barriers to the implementation of the compensation system include:

1. The multiple legal and policy frameworks for compensation processes. Almost every aspect of the oil spill compensation system is governed by unclear or contradictory guidance.
2. The logistics of organising oil spill site visits and impact assessments. The mangrove terrain of the Niger Delta is difficult to travel through, and the region’s infrastructure is in serious disrepair. The security situation is also frequently unstable.
3. The operational procedures used to carry out oil spill assessments are technically deficient and insufficiently precise.
4. If oil spill assessment procedures themselves are deficient, the way in which they are implemented may not meet stakeholder expectations or acceptable standards.
5. Local communities rarely have the expertise to negotiate effectively with oil companies on compensation claims, as some of the legislation implies they ought to.
6. Assuming a case is successful, and compensation is awarded, distributing the money is then a challenge. Traditional governance structures in the Niger Delta are commonly hierarchical and patriarchal, and as such male elders often act as gatekeepers through which monies must be disbursed.
7. The compensation system sits within broader structural issues relating to Nigeria and its oil industry.