Mayo News Online: Shell reserves and reservations
With Liamy MacNally
SHELL is battling on a few fronts this weather. The Corrib project is ongoing but one has to ask, for how much longer? Will the new men at the helm of Shell make changes? Will Corrib be deemed too costly for the future of Shell? They reclassified their reserves at the start of the year after they discovered they had overestimated by 20%. That amounted to just under 4 billion barrels of oil. In typical Shell style the mess did not end there. They have now reclassified almost a further 500 barrels of oil, wiping them off their reserves. Their auditors have refused to sign off on the accounts. Investigations have been mounted by state agencies in three countries and they have lost their chairman, Sir Philip Watts, and Walter van de Vijver, their head of exploration and production. Both have walked the plank in the past two months.
WITHOUT even getting into the history of Shell and the Ogoni people in Nigeria and the subsequent deaths of several people, the next round of responsibility falls to various state agencies after auditors KPMG refused to sign off on the Royal Dutch Shell accounts. KPMG is worried about "the quality of information" it had received. KPMG also has responsibilities as an auditing company. The Securities and Exchange Commission (USA) is investigating Shell’s conduct in the ’‘reserves’ affair. Three countries – Britain, Holland and America – are now carrying out formal investigations into the way Shell carries out its business. The American Justice Department is also carrying out an investigation. There is talk of class actions by shareholders in America. One source claimed that the actions for damages could be "billions of dollars." The Dutch investigation centres on charges of insider trading. It has also emerged that the Dutch royal family has lost a few bob since Shell’s share price came tumbling down’– over 2370 million at the last count. It has plummeted from 640p in 2001 to 320p this year. The worst may not be over yet. The source of the problem is understood to be Nigeria although Shell claims it is a field in Norway where oil stocks were over-estimated. Nigeria offers a generous tax concession to exploration companies based on the amount of their stated reserves in the country. The higher your reserves the better your tax concession. Someone in Shell overstated the Nigerian reserves. Now all the authorities are looking for a slice of the action to ensure that (another) multi-national scandal is cleaned up in the wake of Enron and Parmalat.
THERE are a few significant dates lighting up the Shell calendar for the next few months. The one shareholders fear is that any day there could be an announcement of further reclassifications of reserves. The accounts, due on March 19th with the annual report, have been deferred until the end of May. The annual general meeting of the group is due to take place next month but that too has been delayed. It is now expected on June 28th. The new chairman, Mr. Jeroen van der Veer, will earn his keep over the next few months if he wants to keep this company on the straight and narrow.
There are other dates of note to the company also. April 1st – April Fools’ Day’– is the final date for submissions by the public on the further information in relation to the Corrib project. The due date for a decision on the project from Mayo County Council is May 8th. The Guardian newspaper recently reported that according to Mr. Fadel Gheit, oil analyst with Fahnestock and Co brokerage in New York, "It’s become another day, another crisis with Shell. There are only so many surprises that investors will take and yet management (of the company) still seem in denial." A complete study of all Shell’s reserves is being undertaken by Ryder Scott, an American consultant. This study is to be carried out with the guidelines of the Securities and Exchange Commission’s guidelines in mind. He has not completed his task as of yet. The end of April is the date set for the completion of the reserves update. One wonders will we get an accurate picture of the reserves of gas in the Corrib field. Shell appears to have taken the ‘reserves’ details relating to the Corrib off its website. Shell has also announced the sale of its gas network in Mexico. If Shell off-loads Corrib, which is a possibility, here’s hoping that the new buyer will develop the Corrib gas field offshore.
SHELL has a huge local interest with the Corrib gas project. Their latest (third) planning application for a gas refinery at Bellanaboy in north Mayo is currently being considered by Mayo County Council. The council requested further information in February on the application submitted last December. That further information was furnished – two x A4 folders dealing with the questions raised by Mayo County Council. One of the folders is devoted to a Traffic Management Plan for the project, which, incidentally, involved in or around 100,000 traffic turning movements as 450,000 cubic metres of peat is removed from Bellanaboy to Shramore on the outskirts of Bangor. The Castlebar office of the Galway firm, Tobin Consulting Engineers prepared the Traffic Management Plan. Traffic Management Plans are not new to this project – at least on paper. One was to have been prepared for the last planning application but attempts by several people to view the document have failed - nothing to do with eyesight, less to do with hindsight but more to do with insight. Perhaps the powers that be in Mayo County Council and Shell would oblige with a copy–– if it exists at all.
For those with the stomach for same, the further information supplied is best ingested along with a helping of a report submitted as an objection to the Bellanaboy refinery project by a local Erris man, Brian Coyle, who runs his own engineering company in Galway. He has produced a report that deserves a widespread readership, especially in Mayo. Too many people are accepting, without question, the words of those promoting the project. Brian Coyle raises a series of questions about the whole project – why is an onshore terminal being proposed for this development? There is no precedent for such a development. Why is Shell now proposing to remove up to 450,000 cubic metres of peat from the site? Their earlier applications rule this task out! This type of work was never carried out before. Even with the involvement of Bord na Móna in this part of the project there is no precedent for this because it has never been done before. Why is Bord na Móna getting so involved? Who will be responsible if pollution results from removing this peat and it runs into the waters surrounding Shramore and the salmon spawning grounds. Is there a history of Bord na Móna ‘carelessness’ with peat depositions causing silting in various areas? Has the area near Shramore already been affected by silting? If there is a pollution problem and the blame lies at the door of Bord na Móna, does that mean that the taxpayer is ultimately responsible? It was bad enough to have allowed Ray Burke and his ilk to sign over national assets to foreign based multi-national companies for nothing. It would be preposterous to have to end up bankrolling another multi-national for mistakes carried out by a state sponsored company. Will we ever learn?