London Evening Standard: BP hits back as oil probe goes global
19 March 2004
OIL giant BP today hit back at speculation that it could be dragged into the crisis dogging its fierce rival Shell as US regulators prepare to investigate the global oil and gas industry.
A BP spokesman said the group was 'completely confident' in the way it booked oil and gas reserves and its compliance with US Securities and Exchange Commission guidelines.
Its fightback came amid reports that the SEC may now extend its formal inquiry into the debacle engulfing Shell by looking at the way its competitors account for discoveries.
Its investigation centres on Ormen Lange, the 40-kilometre-long gas field off the coast of Norway that is likely to provide up to a fifth of the Britain's annual gas requirements over the coming years.
Shell yesterday slashed the amount of reserves it intended to book as 'proven' for Ormen Lange this year by 166m barrels, saying that its original booking did not comply with SEC guidelines.
Although 90m barrels is close enough to wells already drilled on the site, the rest was estimated by looking at 3D seismic images.
Shell's newlyappointed head of exploration and production, Malcolm Brinded, called the mistake 'disappointing and embarrassing' and vowed the group would not stumble again.
The cut means the company has booked about only 20% of its entitlement to gas in the Ormen Lange field, compared with an estimated 80% for BP and Norway's Norsk Hydro, partner in the project alongside Exxon and the Norwegian government.
Norsk Hydro, which still has to file its reserve statements to the SEC, has booked 366m barrels while BP is
thought to have booked nearly 200m barrels in its 2003 filing.
City analysts said the risks of a formal investigation into the industry were rising by the day despite BP and Norsk Hydro's insistence they had done nothing wrong.
A spokesman for BP, which trimmed reserves by 2% in its 2003 annual report, said: 'We are completely confident in the reserves we reported, and they comply with SEC regulations.'
One analyst said Shell's statement yesterday was a timely move as the Anglo-Dutch group had effectively transformed what has been a company-specific crisis into an industry issue.
'The amount that has gone from Shell's Ormen Lange booking is 4% of the whole recategorisation that the group has announced since January,' he said. 'It's a rather effective smokescreen.'
Shell still faces a heated confrontation-with leading institutional investors next week when the Association of British Insurers is due to lead a meeting to discuss possible structural changes.
But fund managers are seeting over yesterday's downgrade. Peter Montagnon, head of investment affairs at the ABI, said: 'We view these developments with very considerable concern.'