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The Daily Telegraph: FSA presses Shell on reserves rules


By Christopher Hope, Business Correspondent (Filed: 15/03/2004)


The Financial Services Authority is investigating whether Shell broke City rules when the oil major disclosed that it had overstated its proven reserves. 


The news means that Shell is facing five different fronts in its battle to restore its credibility in the City. Shell confirmed yesterday that it was in talks with the FSA over the issue. The company would not say which side initiated the discussions.


A Shell spokesman said: "We have been in communication with the FSA in line with our continuing obligations and we will continue to work with them." The FSA said that it never commented on its investigations. However, a source said: "Given what people have written you can draw your own conclusions."


Shell disclosed in January that it had exaggerated the amount of oil and gas it was certain of extracting by 20pc or 3.9 billion barrels. That announcement later led to the resignations of Sir Philip Watts, the chairman, and Walter van der Vijver, exploration and production director after Shell's board lost confidence in them.


Reports yesterday said that the FSA is concerned about the circumstances surrounding the January announcement. The oil giant would face huge fines if found guilty of market abuse by the authority. The FSA is the latest in a string of watchdogs and special interest groups to question Shell about its reserves.


Shell's audit committee, advised by an independent team of lawyers, is already investigating how the company had been accounting for its reserves. Last week, the committee handed the preliminary findings of its investigation to the United States' Securities and Exchange Commission.


Shell, which is also listed in the Netherlands, is facing questions from the Euronext bourse in Amsterdam and the Dutch Shareholders Association.


The oil major, which publishes its annual report on Friday, is also facing a series of court actions from Shell's US investors who bought shares in Shell when the reserves were wrongly stated.;$sessionid$LEVMZCORPTPWNQFIQMGCFFWAVCBQUIV0?xml=/money/2004/03/15/cnoil15.xml&menuId=242&sSheet=/money/2004/03/15/ixcity.html&menuId=242&_requestid=158603

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