Officials of Royal Dutch Shell have held talks in Nigeria's southern city of Port Harcourt with representatives for the Bodo community on compensation and clean-up five years after major oil spills devastated parts of the Niger Delta.

The two oil spills that started in 2008 led to the largest loss of a mangrove habitat ever caused by a spill, affecting about 30,000 people in the Niger Delta area since then, according to London-based law firm Leigh Day.

"These people, since 2008 they are living on a creek of oil. You step out of the front door you see oil, breathe in oil and toxic fumes,'' said lawyer Daniel Leader of Leigh Day, a law firm that is representing about 15,000 people from the community that filed a lawsuit in 2012.

Although Royal Dutch Shell has admitted responsibility for the two spills, the impact has been disputed and will be the main focus of negotiations in Port Harcourt.

Compensation dispute

Royal Dutch Shell said a joint investigation team estimated 4,100 barrels were lost in the two spills. That estimate is based on the initial investigations by representatives from the company and the local community, Jonathan French, the company's spokesman, told The Associated Press news agency.

"Having said all that, it doesn't matter how much was spilled because the compensation will be based on the financial loss that people have suffered because of the spill in the lagoon,'' he said.

"And that is a matter of dispute between us and the claimant."

Leigh Day said that 15,000 fishermen and 31,000 inhabitants of 35 villages were affected in and around the Bodo lagoon and its associated waterways.

The law firm says independent experts estimate between 500,000 and 600,000 barrels were spilled, devastating the environment that sits amid 90 square kilometres of mangroves, swamps and channels.

But Shell says such estimates are high.

Shell spokesman French said the company did not have access to the area to clean it up, and that not all oil spilled was a result of the company's operations.

Shell blames most of the spills in the region on attacks by armed groups or thieves tapping into pipelines to steal crude oil, which ends up on the black market.

Nigeria, one of the top crude oil suppliers to the United States, requires companies to promptly clean up oil spills but the policy is not enforced.

Both parties have said they hope to reach an agreement by the end of the week.

Neither side would discuss possible settlement figures. Britain's Guardian newspaper reported that the company is thought to be offering about $20 million in compensation while the villagers seek $200 million.

Local communities remain largely hostile to Shell and other oil firms because of environmental damage. Some environmentalists say as much as 550 million gallons of oil have been poured into the delta during Shell's roughly 50 years of production in Nigeria.

The United Nations has recommended that the oil industry and Nigeria's government set up a fund, with an initial injection of $1 billion, to begin what could be a 30-year clean-up and restoration project in the oil-stained region.