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The Guardian: Analysts hit out at Shell board's part-timers


Terry Macalister

Wednesday April 21, 2004


The City yesterday put non-executive directors firmly in the firing line at Shell saying they should have done more to prevent the reserves scandal.


An attack led by investment bank Lehman Brothers came as Shell's dismissed exploration boss, Walter van de Vijver, came out fighting again. He insisted that a damning report published by the oil corporation 24 hours earlier had in many ways exonerated him but also quoted him out of context.


Lehman said further management changes were needed and asked which other directors - beyond the executives who have been dismissed or moved - were culpable.


"Right through the organisation too much emphasis appears to have been placed on Shell's assurances processes, with insufficient independent challenge or thinking. In our view the overall failure of the reserves reporting systems implicates more than those who have already departed, particularly the non-executives whose role is to protect shareholders' interests," said a research note from Lehman's oil and gas team in Britain.


The energy analysts - whose views were supported privately by New York-based rivals - said the appointment of new non-execs may have to wait until the review of the group's structure.


But at least one Shell shareholder said last night he had no immediate appetite for more bloodletting and wanted to see other changes in the culture and organisation first.


Meanwhile Mr Van de Vijver's lawyer said the exploration boss had been "outspoken and persistent" in attempts to bring public oil reserve figures in line with more realistic private assumptions.


Washington attorney John M Dowd said the Dutch oil boss had been instrumental in ordering "detailed reviews of reserves in Nigeria and Oman where many of the disputed reserves were located".


Mr Van de Vijver was reacting to the results of an investigation by another American law firm, Davis Polk & Wardwell, which extensively quoted emails sent by the exploration chief to his chairman, Sir Philip Watts, who was dismissed in March.


It showed him questioning the veracity of the reserves figures but also quoted a damaging December 2003 message following legal advice that the reserves problems should be revealed as soon as possible.


"This is absolute dynamite, not at all what I expected, and needs to be destroyed," the Dutch executive was quoted in the Davis Polk & Wardwell report as saying.


Yesterday Mr Dowd argued it was "unfortunate that the report ... did not include the context in which the email was written or its true meaning".


The lawyer said the exchange was part of efforts by Mr Van de Vijver to clarify data on reserves and ensure "work progressed at maximum pace".


Mr Dowd said his client has been insisting since February 2002 that the company might be overestimating reserves.


A damning November 2003 email had Mr Van de Vijver telling Sir Philip that he was "becoming sick and tired about lying" about the reserves problem.


The report came alongside the demotion of Shell finance chief Judy Boynton.


Meanwhile Cairn Energy has made another discovery in Rajasthan on oil acreage sold to it by Shell for a song in 2002.


Cairn's shares - which have almost tripled this year - raced ahead a further 10% to 980.5p after it estimated a further 400m barrels of oil could be in place at a location seven miles north of Mangala, the scene of an earlier strike.,3604,1197121,00.html

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