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The Times: Mountain to climb: In Peter Voser, is Shell right to hire the finance director of a company which two weeks ago detailed "accounting irregularities and other improper business practices"?

 

By Mike Verdin

Posted 28 June 04

 

Peter Voser is fond of geological analogies, as befits a national of a country noted for its Alpine peaks. "When I came here the debt mountain looked like the Himalayas to me," the Swiss executive said in February last year, 12 months after joining ABB as finance director.

 

"Now it's like the Matterhorn, still high, but it can and it will be climbed."

 

At Shell, however, the oil giant to which Mr Voser's defection was announced this morning, he may have to hone his comparisons with Switzerland's cheeses rather than its mountains. Shell's main problem concerns holes rather than peaks, and what is not there - abundant oil reserves - rather than what is.

 

The, four, revisions this year which have cut Shell's estimate of "proven" stocks by more than 20 per cent, to less than 14.5 billion barrels of oil, have left the company with sufficient guaranteed reserves to last only about ten years. It has fallen further behind its larger rivals BP, which has more than 18 billion barrels, enough for nearly 15 years, and ExxonMobil, which has 21 billion barrels of copper-bottomed, shale-topped oil and gas stocks.

 

If this appears like a problem solely for Shell's exploration operations, which should find more oil, or drilling experts, who should refine the technology for removing it, then look again. It is an accounting issue too. A matter of deciding which reserves can be classified as "proven", by Securities and Exchange Commission standards, and which cannot.

 

The boardroom shake-up which followed Shell's reserves debacle not only ousted Sir Philip Watts as chairman and Walter van de Vijver as head of exploration and production. It also cost Judy Boynton, Mr Voser's predecessor, her post.

 

If Mr Voser could find a way to reclassify the "lost" reserves, Shell would appear mightily more attractive in investors' eyes.

 

Such a revision is unlikely to be readily achievable. Where Mr Voser could more easily make his mark is in stemming the investment in exploration operations.

 

Two months ago, Shell said it was increasing its capital expenditure budget this year by $2 billion after suffering "upward cost pressure" at Russian and Nigerian projects. The way to appease investors worried about a lack oil in the ground it is not to tell them of a torrent of cash flying out the door.

 

But is Mr Voser up to the task? The timing of his appointment is unfortunate, coming two weeks after ABB admitted that it had lost about 40 million, over six years, to "accounting irregularities and other improper business practices" at an Italian subsidiary. Mr Voser will spend his last days at the engineering company revising and preparing to republish group results over six years.

 

The company, which lost $767 million (420 million) last year, is also the subject of a European Commission inquiry into price fixing and is dogged by US asbestos litigation.

 

Yet it would be wrong to pin too much blame for such difficulties, including a relatively small fraud at a subsidiary, on the group finance chief. His record on the macro financial issues is impressive, for example in the 1.5 billion cash call, backed by a 540 million bond issue and 600 million credit facility, which he arranged for ABB last year.

 

If there is a question mark over Mr Voser's suitability at Shell it is that he is not, really, an outsider, and so might lack the ability to appreciate the fault lines in Shell's operational structure. He joined ABB from Shell, where he had worked since leaving university in Zurich 20 years before.

 

However, his experience at the oil giant will at least allow him to find his way around the Shell tangle. To be able to find how to add to that Sound of Music showstopper "Climb every mountain, cross every stream", the line: "And fill every hole in corporate oil reserves."

 

http://business.timesonline.co.uk/article/0,,8209-1156409,00.html


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