Minneapolis Star Tribune: Dutch/Shell Group exec was 'sick and tired' of lying
April 20, 2004
LONDON -- A top executive of Royal Dutch/Shell Group of Companies wrote in an e-mail that he was "sick and tired about lying" about the company's inflated oil and gas reserves estimates, an investigation commissioned by Shell reported Monday.
The investigation, whose findings Shell accepted in full, found that some bosses knew for almost two years that the company had publicly overstated the size of its reserves. The shaken oil giant also announced that its chief financial officer had stepped down, the latest in a string of high-level casualties since Shell's announcement in January that its confirmed oil and gas holdings were much smaller than it had claimed.
The company said Monday that it had now downgraded a total of 4.35 billion barrels, or about 22 percent of its reserves, from "proven" to less-certain categories. That is 200 million barrels more than its previous estimate.
Shares in Shell Transport & Trading Co. fell 0.76 percent to Monday on the London Stock Exchange.
"Shell has unquestionably stumbled and has learned a tough lesson," said Lord Oxburgh, chairman of Shell Transport and Trading Co. PLC, the British component of the Anglo-Dutch group, calling the inaccurate estimates a "major embarrassment."
A summary of an outside investigation into managers' conduct, made public by Shell, said executives in its exploration and production division had exaggerated the size of reserves and failed to act when it became clear the estimates were unrealistic.
Walter van de Vijver complained about the estimates after he took over as chief of the division in June 2001, replacing Sir Philip Watts, who had been promoted to Shell chairman, the summary said.
The report said Van de Vijver notified Shell's managing directors in February 2002 that the company's reserve classification rules did not match those of the U.S. Securities and Exchange Commission and that Shell might have overestimated its reserves by 2.3 billion barrels.
"I am becoming sick and tired about lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive/optimistic bookings," Van de Vijver wrote in a November 2003 e-mail to Watts, released in the summary.
When legal advisers sent Van de Vijver a memo a month later saying Shell should disclose the problems, the report said, he responded by e-mail: "This is absolute dynamite, not at all what I expected and needs to be destroyed."
The memo was preserved, the lawyers' report said.
Watts and Van de Vijver resigned last month.