Nigeria Seeks $3 Billion Fine For Chevron Jack-Up Fire

The KS Endeavor jack-up rig on fire on January 16 offshore Nigeria. Photo: Chevron

Nigeria’s oil spill agency said it wants Chevron Corp., the world’s fourth-largest energy company, to pay a $3 billion penalty for a rig explosion that caused a 46-day fire.

“Having looked at the relevant literature and what happens in other countries, we recommended a fine of $3 billion for Chevron,” National Oil Spill Detection and Response Agency’s Director-General Peter Idabor said in an interview in Abuja, the capital, yesterday.

For now, the planned penalty is only a suggestion and “still not conclusive” as it requires the approval of lawmakers and President Goodluck Jonathan’s government, he said.

Chevron was drilling a gas-exploration well at Funiwa, about six miles (9.6 kilometers) off Nigeria’s delta coast, when it exploded Jan. 16, killing two workers. The fire that followed stopped on March 2 after the flow of natural gas dried up, the company said in a statement.

The accident was caused by equipment failure, the oil spill agency known as NOSDRA, said. Chevron “respects and complies with the laws in the countries in which it operates,” Kurt Glaubitz, a San Ramon-based spokesman, said today in an e-mailed statement.

Worst Spill

NOSDRA is also investigating a seven-week gas leak that started on March 20 at the Obite field operated by Total SA’s Nigerian unit to determine appropriate penalty, Idabor said. The agency had suggested to the government in July that Royal Dutch Shell Plc pay a $5 billion fine for an oil leak in December from its offshore Bonga field that caused the country’s worst spill in more than a decade. Shell said less than 40,000 barrels leaked.

Shell, Exxon Mobil Corp., Chevron, Total SA and Eni SpA operate joint ventures with state-owned Nigerian National Petroleum Corp. that pump more than 90 percent of the crude output of Africa’s top oil producer. Shell is the biggest operator in the West African country by number of oil fields, followed by Exxon Mobil and Chevron.

Until Shell’s Bonga spill, the worst on record in Nigeria happened in January 1998, when a pipeline linking Exxon Mobil’s Idoho platform to its Qua Iboe export terminal failed, spewing about 40,000 barrels into the sea, the company said.

By Elisha Bala-Gbogbo. Copyright 2012 Bloomberg