London Evening Standard: Shell 'happy to hide downgrade'
19 March 2004
SHELL's former exploration chief Walter van de Vijver was prepared to keep the oil giant's recategorisation of reserves in Nigeria a secret, it was claimed today.
The Dutchman recommended in December that revised figures for Shell's holdings in the oil-rich State remain 'confidential in view of host country sensitivities'.
The fresh twist to the rumbling crisis was revealed by the New York Times and is certain to heap further embarrassment on the Anglo-Dutch group.
Its embattled communications team again refused to comment, saying the independent audit committee probing the affair had gagged the business.
A spokesman said: 'The group has been advised by the audit committee to defer responding to issues that led to the reserves recategorisation on 9 January until the completion of its review.'
Shell's sprawling Nigerian operation was central to that downgrade which saw 3.9bn barrels of oil and the gas equivalent wiped from its 'proven' base.
The New York Times said the group concluded late last year that 1.5bn barrels of its Nigerian reserves, or 60%, did not meet US standards for proven reserves.
Shell said the Nigerian government 'appeared satisfied' with its explanation for the downgrade. Van de Vijver was ousted with chairman Sir Philip Watts a fortnight ago.
The axe may fall again
INSTITUTIONAL investors are willing to give Shell's new executive team time to resolve the reserves issue crippling the group, but warn that more changes may be necessary.
Sir Philip Watts and his exploration chief Walter van de Vijver were ousted a fortnight ago and speculation has raged that a further cull may take place, centring on finance chief Judy Boynton. But analysts, shocked by yesterday's second reserves downgrade in three months, have called for calm until the group's audit committee completes its internal review next month.
Finley McDonald, UK investment manager at Britannic Asset Management said: 'We are more interested in getting to the end of the review process and seeing the outcome of that before making a judgment. It's wrong to say people are happy with the management but there needs to be an element of pragmatism here. We have to give them a chance to get their feet under the desks and judge the extent of the problems.'
US reports suggest that Boynton and Shell's new chairman Jeroen van der Veer knew about the reserves problem as long ago as February 2002, a claim vehemently denied by van der Veer.
Insiders believe Watts' departure may be enough to satisfy the critics, who will now have to wait until the delayed annual general meeting on 28 June to vent their frustrations at the new directors.
Watts has hired Washington lawyers Crowell & Moring to advise him as the prospect of criminal charges remains. The US Justice Department is investigating the crisis.
• An energy consortium, including Shell, working on the huge Kashagan oilfield in Kazakhstan has been hit with a $150m (£82m) fine for delaying commercial output by three years to 2008.