* Case is closely watched by oil firms, environmentalists
* Dispute is over damage caused by two oil spills in 2008
* Shell says progress has been made on spill cleanup plans
By Tife Owolabi
PORT HARCOURT, Nigeria, Sept 13 (Reuters) - Nigerianvillagers on Friday rejected an offer of compensation from RoyalDutch Shell for damage done to their livelihoods by oilspills from pipelines operated by the company, their lawyerssaid.
Failure to reach a settlement means the Anglo-Dutch oilmajor and around 15,000 members of the Bodo fishing communitiesin southeastern Nigeria remain locked in litigation.
Their lawyers said they will now go back to a British courtto request a trial timetable.
The legal action is being closely watched by the oilindustry and by environmentalists for precedents that could havean impact on other big pollution claims against majors.
"We haven't reached agreement on compensation, which isdisappointing," a spokesman for Shell's Nigeria unit said.
"Nonetheless, we're pleased to have made progress inrelation to cleanup," he added, saying measures had been put inplace to get remediation work done as soon as possible.
A source close to Shell and another source involved in thenegotiations told Reuters the company offered total compensationof 7.5 billion naira ($46.3 million).
Leigh Day, the British law firm representing the villagers,said the compensation offer amounted to approximately 1,100pounds ($1,700) per individual impacted, without giving thenumber of people it says were affected.
"The whole week has been deeply disappointing," said MartynDay of the London-based law firm, who has been in talks withShell since Monday in Nigeria's oil hub Port Harcourt.
"The settlement figures are totally derisory and insultingto these villagers," he added.
The Nigerians launched a suit against Shell at the HighCourt in London in March 2012, seeking millions of dollars incompensation for two oil spills in 2008, but both sides agreedto try and settle in compensation talks in Port Harcourt.
Shell accepts responsibility for the Bodo spills but the twosides disagree about the volume spilt and the number of localpeople who lost their livelihoods as a result.
Citing independent experts, Leigh Day says up to 600,000barrels of crude were spilt, which would make it one of theworst in history. The volume spilt in Alaska in the 1989 ExxonValdez disaster was put at 257,000 barrels.
But Shell, citing a report by a joint investigative team notcontrolled by the firm, puts the volume spilt in the twooriginal incidents at just 4,100 barrels.
Shell accepts that a significantly higher volume of oil wasspilt later but says this was due to other factors includingsabotage. It has complained that its clean-up teams were attimes denied access to sites by local groups.
The Niger Delta has for years been plagued by a range ofproblems including environmental degradation, kidnappings, theftof crude from pipelines, armed rebellions, and conflict betweencommunities over clean-up contracts or compensation deals.
