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Nigerian Communities Win Legal Battle Against Shell

The UK Court of Appeal has reversed a ruling issued by the UK High Court favoring the British oil giant, Shell plc SHEL. The legal battle by the two Nigerian communities, Bille and Ogale, which has been continuing for almost 10 years has been given a path for full trial, whereby, the communities will get a chance to present their case against Shell’s Nigerian subsidiary, Shell Petroleum Development Company (“SPDC”), for environmental harm caused by oil spills.

Niger Delta Communities Secure Legal Victory Against Shell

The renowned communities of Bille and Ogale, located on the oil-rich Niger Delta, started their legal battle almost 10 years ago, accusing Shell of more than 100 oil spills leading to contamination of land, waterways and drinking water, making them unable to farm and fish, which is their basic source of income.

The Court of Appeal dismissed the earlier ruling made by the UK High Court, wherein, the claims were to be treated as “Global Claims.” Under Global Claim, the local communities would have to prove that only Shell was 100% responsible for all the environmental damage in their area in order to win the proceedings initiated by them. This claim was practically impossible to be proved by these communities.

The Court of Appeal, however, paved the way for the case to a full trial by overturning the previous decision. Under the new judgment, the company will disclose its crucial internal documents, which might reveal the ugly truth.

Overview of the Legal Battle Between Shell and the Communities

The legal battle between the company and the communities has been going on for a decade but the progress has been slow. The communities faced the initial victory in 2021 when the Supreme Court held that SHEL would potentially be accountable for the environmental damage in the oil-rich Niger Delta.

The extent of damage in the Niger Delta region has been huge. The severity of the environmental damage has been so severe that the entire area has almost become uninhabitable.

The company has always justified itself claiming that it is not solely responsible for the environmental harm in the region, attributing it to the illegal oil tapping by the locals. However, it was argued that the main reason for the oil spill was Shell’s failure to maintain proper infrastructure and respond to disasters.

SHEL’s Zacks Rank and Key Picks

London-based Shell plc is one of the primary oil super majors — a group of U.S. and Europe-based big energy multinationals with operations that span almost every corner of the globe. Currently, SHEL has a Zacks Rank #3 (Hold). The company remains a major investor in the West African country of Nigeria even after divesting its onshore business.

Investors interested in the energy sector might look at some other stocks like Archrock AROC, Core Laboratories Inc. CLB and Nine Energy Service, Inc. NINE. While Archrock currently sports a Zacks Rank #1 (Strong Buy), Core Laboratories and Nine Energy carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in the United States, Archrock is a provider of natural gas contract compression services as well as a supplier of aftermarket services of compression equipment. The Zacks Consensus Estimate for AROC's 2024 earnings indicates 50.72% year-over-year growth.

Core Laboratories provides reservoir description and production enhancement services and products to the oil and gas industry, principally in the United States, Canada and internationally. CLB’s expected EPS (earnings per share) growth rate for three to five years is currently 22.20%, which compares favorably with the industry's growth rate of 14.50%.

Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. NINE’s expected EPS growth rate for the current quarter is 23.08%, which compares favorably with the industry's growth rate of 6.36%.

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Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report

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