The Miami Herald: Shell's Oil-Reserves Rumpus Set to Rumble On
By Ian Watson, Sunday Business, London Knight Ridder/Tribune Business News
Posted on Wed, Mar. 17, 2004
When taking over as Shell's new chairman recently, Jeroen van der Veer said he hoped a line would be drawn under the group's overstatement of its proven reserves by the equivalent of 4 billion barrels of oil. Well, it hasn't and it's only when you convert these lost reserves into today's values you appreciate what all the fuss is about.
The missing or redesignated reserves, which account for about 20 percent of Shell's stated total, would be worth about $140 billion (UK pound 77 billion, E113 billion) at today's crude prices of $35 a barrel, quite enough to keep shareholders happy in dividends for years.
The reduction is equal to 13 percent of all the proved crude reserves in the US, which explains why interest is being shown by the SEC, America's main financial regulator. For Van der Veer the problems from its reserves shortfall are far from over.
Everybody can get their sums wrong but what the SEC wants to discover is when Shell's senior management first knew or suspected that reserves were not as previously publicly stated. Its end game is to find how long there may have been a false market in Shell's shares.
The recently sacked chairman, Sir Philip Watts, is said to have informed the joint boards of Shell's British and Dutch holding companies about the situation in early January; but a leaked internal memo appears to suggest that senior executives, perhaps even Van der Veer himself, knew or had some information about the situation as early as February 2002.
Shell, of course, will survive all this. It is the world's second largest company and shareholders, though annoyed at the restatement of reserves, don't seem to be too bothered by the prospect of more heads rolling.
Since 9 January, when the shares took a big hit on the announcement, those of Shell Transport & Trading have risen by almost 7 percent to 371.5 pence on the London Stock Exchange while the shares in Royal Dutch are up 4.5 percent to E40 on the Amsterdam Stock Exchange.