Oil giant Shell has agreed to pay a Nigerian fishing community 55 million pounds (about $83.5 million US) for the worst oil spill ever suffered in Nigeria.

Wednesday's agreement ends a three-year legal battle in Britain over two spills in 2008 that destroyed thousands of hectares of mangroves and the fish and shellfish that sustained villagers of the Bodo community in Nigeria's southern Niger Delta.

It "is thought to be one of the largest payouts to an entire community following environmental damage," the claimants' London lawyers, Leigh Day, said.

Shell said it is paying 35 million pounds ($53.1 million) to 15,600 fishermen and farmers and 20 million pounds ($30.4 million) to their Bodo community.

"We've always wanted to compensate the community fairly," said Mutiu Sunmonu, managing director of Shell Nigeria, which is 55 per cent owned by the Nigerian government.

Shell originally offered 4,000 pounds ($6,000) to the entire community, Leigh Day said.

Sunmonu said Shell also has agreed and is "fully committed" to a cleanup.

Chief Sylvester Kogbara, chairman of the Bodo Council of Chiefs and Elders, said he hoped "that Shell will take their host communities seriously now" and embark on a cleanup of all of Ogoniland.

Friction between villagers, Shell for decades

A U.N. Environment Program report has estimated it could take up to 30 years to fully rehabilitate Ogoniland, an area where villagers have been in conflict with Shell for decades.

Kogbara said the community money will be used to provide needed basic services. "We have no health facilities, our schools are very basic, there's no clean water supply," he told The Associated Press.

Individually, he said villagers are discussing setting up as petty traders and other small businesses until their environment is restored. Each person gets 2,200 pounds ($3,340) in a country where the minimum monthly wage is less than $100.

Shell's Sunmonu insisted that oil theft and illegal refining remain "the real tragedy of the Niger Delta" and "areas that are cleaned up will simply become re-impacted."

Amnesty International said Shell continues to blame oil theft for spills — which means it does not have to pay compensation — when the company's own documents state its aging oil pipelines present a "major risk and hazard."

Shell had argued that only 4,000 barrels of oil were spilled in Bodo while Amnesty International used an independent assessor who put it at over 100,000 barrels — considered the largest ever oil spill in mangroves.

"Oil pollution in the Niger Delta is one of the biggest corporate scandals of our time," said Audrey Gaughran of Amnesty International. She said thousands more people remain at risk because of Shell's failure to fix aging and dilapidated pipelines.