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Times Online: Shell to pay £180m to settle reserves scandal

Shareholders in the UK and Europe are to benefit as Shell draws another line under the 2004 reserves scandal

April 11, 2007
Steve Hawkes

Royal Dutch Shell is paying thousands of shareholders a total of $352.6 million (£180 million) in compensation for the reserves scandal that sparked the worst crisis in the oil giant’s century-long history.

The group today said that “without admitting any wrongdoing” investors outside of the US, mainly Europe and the UK, would be paid compensation under a series of settlements with shareholder groups.

Shell signalled that another bill was expected in the coming weeks in the US, for anyone who bought Shell shares on the New York Stock Exchange.

“Shell intends to offer the same proportional settlement to investors in the US,” the group said.

It has set aside a total of £250 million in its accounts for shareholder compensation.

Given Shell’s record profits last year, it would take the group one week to generate this much money. But it is still likely to be one of the largest ever compensation payouts ever agreed by a FTSE 100 company.

Today’s move comes almost three years to the day since Shell stunned the City by admitting it had lied about the amount of proven oil and gas discoveries on its books.

The reserves number had to be cut by more than a quarter and the scandal led to the departure of Sir Philip Watts, the former chief executive, and Walter van de Vijver, the former head of exploration and production.

Jeroen van der Veer, the current chief executive, replaced Sir Philip. He recently said the promotion was the worst day of his life given the circumstances.

Shell settled claims with both the US Securities and Exchange Commission, paying it $120 million, and the UK’s Financial Services Authority.

The group’s production around the world is set to fall some way behind fierce rivals Exxon and BP over the coming years as it looks for new discoveries to plug the holes on its reserves portfolio.

The main part of today’s agreement has been signed with institutional investors led by Dutch pension funds ABP and PGGM, the Shell Reserves Compensation Foundation, and the Dutch investor group Vereniging van Effectenbezitters (VEB).

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