The Scotsman: Shell chief defiant over reserves cut

JIM STANTON

DEPUTY BUSINESS EDITOR

THE chairman of Shell today insisted the embattled oil giant is not in any financial danger following the second downward revision of its oil reserves in three months.

Jeroen van der Veer - who replaced former chairman Sir Philip after he oversaw a 20 per cent downgrade of the group’s proven oil reserves in January - said: "This is a company with world-class assets. We are financially healthy."

However, he admitted that the Anglo-Dutch group’s latest revelation had resulted in "a big dent in our reputation".

But reports in the New York Times about Shell’s recording of its Nigerian reserves could stoke up further woes for the troubled group.

Yesterday, Shell, which operates about 1100 petrol stations in the UK, said a further 470 million barrels of oil must be reclassified.

The firm’s new exploration and production director, Malcolm Brinded, described the latest reserves downgrade, which he oversaw and which centred on the overbooking of assets in Norway, as "disappointing and embarrassing".

The blow has left investors fearing further revision downgrades when the company finally publishes its annual results. They were originally scheduled for release today - but are not now expected until May. Shell has also postponed its annual meeting until June 28.

Mr Brinded suggested he was personally confident there would be no more shocks but declined to offer his view as one issued on behalf of the group.

"I am determined and we are determined that EP [Exploration and Production] and the group cannot again stumble in such a manner," he added.

Shell has said reviews were continuing, adding that "if additional actions are identified, they will be actioned and announced as appropriate".

According to the New York Times, citing information contained in internal Shell documents from late last year, the company withheld information about a big reduction in its oil and gas reserves in Nigeria for fear of damaging its business relationship with the government.

The report said Shell had concluded that 1.5 billion barrels - 60 per cent of its Nigerian reserves - did not meet accounting standards for proven reserves.

A December 8 report prepared by Walter Van de Vijver, then head of exploration and production, recommended the revised Nigerian reserve remain "confidential in view of host country sensitivities" according to the newspaper.

Shell recorded 2.524 billion barrels of proven reserves in Nigeria at the end of 2002. But after reviews and tightening of company guidelines, only 990 million barrels fully complied with the rules, according to the report. Mr Van de Vijver and Mr Watts were both ousted after the January revelation.

Analysts believe that revealing the extent of Shell’s lowered reserves in Nigeria could affect the country’s quota discussions with Opec.

http://business.scotsman.com/index.cfm?id=320202004