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CANADIAN PRESS (NATIONAL POST) Royal Dutch/Shell scales back proved reserves; Canadian estimates unaffected

January 9, 2004 

LONDON (AP) - The Royal Dutch/Shell Group is downgrading one-fifth of its proved oil and natural gas reserves after reassessing the prospects of some of its projects. 

Shell said Friday it was recategorizing 3.9 billion barrels of oil equivalent from proved reserves to "scope for recovery." None of Shell's Canadian reserves were affected by the change. The "scope for recovery" category means that although the same volume of hydrocarbons is believed to be present, the development of the projects is not mature enough for them to qualify as proved reserves. 

The international company's share price tumbled about six per cent in London and Amsterdam after the announcement. 

Shares in Shell Canada, 78 per cent owned by Royal Dutch/Shell, slipped 0.9 per cent in Toronto. 

Royal Dutch/Shell said the reclassification of reserves followed studies completed in the fourth quarter of 2003. 

"A number of countries are affected by the change, with the largest impact in Nigeria and Australia," the company stated. 

"A significant proportion of the recategorization relates to the current status of project maturity." 

Shell said it expected to reclassify the reserves as "proved" as projects proceed, and "There is no material effect on financial statements for any year up to and including 2003." 

Two-thirds of the recategorization involved crude oil and natural gas liquids, and one-third affected natural gas. 

Royal Dutch/Shell said it does not expect the recategorization to affect production in the near term. 

Following the announcement, Standard and Poor's Ratings Services placed its AA-plus rating on Shell Canada on credit watch with negative implications, as a result of similar action being taken on the parent company. 

"While the negative credit watch suggests the long-term and senior unsecured debt ratings may be lowered, the short-term ratings will not be affected by any future negative ratings revision," said S&P credit analyst Michelle Dathorne. 

"At present, Shell Canada's long-term and senior unsecured ratings are one notch below its parent company, and we expect a rating differentiation will be maintained." 

Shell Canada, one of Canada's largest natural gas producers and a major oilsands operator, refines gasoline and sells fuel through a national network of Shell stations. 

Its stock (TSX:SHC) closed down 55 cents at $62.35 on the Toronto market. 

In London, Shell Transport and Trading Co. fell 6.2 per cent to 376.22 pence. 

Shares in the Royal Dutch Petroleum, generally among the most stable issues on the Amsterdam exchange, fell six per cent to 38.94 euros. 

The Canadian Press 2004

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