The Daily Telegraph: Watts knew 'two years ago' of Shell's inflated reserves
By Christopher Hope, Business Correspondent (Filed: 09/03/2004)
Sir Philip Watts, the former chairman of Shell, was warned as long as two years ago that Shell was overstating its reserves, it was claimed yesterday.
Sir Philip was sacked by Europe's third-biggest oil company last week in the wake of news that Shell had overstated its "proven" oil and gas reserves by 20pc, or 3.9billion barrels.
A newspaper report claimed that an internal memorandum showed that Shell's method of accounting for gas reserves differed from the definition used by the US's Securities and Exchange Commission.
The memo, from early 2002, stated that Shell might have to cut 1billion barrels off its reserves because of the different definitions.
The news tallies with suggestions from industry figures that Shell used different methodology inside the company to account for reserves.
One senior source said: "I have heard that they have a dispensation, waiver or something which meant that they were able to report ostensibly under SEC but not in fact under SEC but some internal [way]."
Shell has already asked its audit committee to investigate how the company accounted for its reserves. It is due to report in the next few weeks.
A spokesman confirmed that Shell's interpretation of how to apply SEC guidelines for proven reserves formed part of the committee's review. "That is part of the review which we can't comment on," he said.
Last week Shell said "no finding of illegal conduct has been made by the boards" in the wake of the resignations.
Meanwhile, Shell said yesterday that it had made an important oil find off the east coast of Malaysia.
No output estimates were given but one source said that it could be the biggest deep water find in Malaysia.
Shell Malaysia and ConocoPhillips own 40pc each in the field, while Petronas Carigali owns the remaining 20pc.