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Fate of the oil giant Shell rested on retired part-timer

By Alfred and John Donovan

The website publishes on a daily basis confidential documents relating to Royal Dutch Shell, the world’s second largest publicly owned oil company. The website is owned by the authors of this article.

Shell hit the news headlines in January 2004 when news broke of a huge fraud involving the oil giant’s oil and gas reserves. Basically investors were conned into believing that Shell had significantly more proven reserves than it actually had. Shell had to pay $170 million in fines imposed by financial regulators. The settlement of class action lawsuits will cost Shell shareholders several hundred million dollars.

The amount of proven reserves held by an oil company is a key factor in its stock market value.  A report by a New York law firm, Davis Polk & Wardwell, revealed that the individual with an oversight function in relation to verifying Shell’s proven reserves was a retired former Shell employee who worked part-time, Mr Anton Barendregt.  He apparently viewed his job as being “largely ceremonial” and claimed no one paid any attention to what he said in any case. This was of course a shocking revelation.

The following is an extract from the confidential Davis Polk & Wardwell Report followed by a link to Volume 1 of the videotaped oral examination of Mr. Barendregt.

Anton Barendregt – Group Reserves Auditor (1998 – 2004)

Like his predecessor, Anton Barendregt is a retired Shell reservoir and petroleum engineer. Barendregt has been Group Reserves Auditor since 1998. Barendregt was contracted to work 90 days per year but in each of 2002 and 2003 worked closer to 150 days. Barendregt received no specific training for his position, including no training with respect to SEC requirements; he was simply given a copy of the Group Guidelines. In addition, he had no legal liaison or contact within Shell’s legal department with whom to discuss or raise potential compliance issues.

Barendregt’s own view is that his job was largely ceremonial, that his influence was limited, and that – except for Frank Coopman when he became EP CFO in July 2002 – no one paid appropriate attention to his reports or views.

Barendregt stated that Remco Aalbers was also generally supportive when Aalbers was the Group Reserves Coordinator.  However, Barendregt related one encounter in which, after sending an e-mail seeking production forecasts from an OU in order to assess the reasonableness of its proved reserves submission, he was approached by another former Group Reserves Coordinator and told that he should not interfere with reserves issues. Barendregt did not pursue the issue.

VIDEOTAPED DEPOSITION UPON ORAL EXAMINATION OF ANTON BARENDREGT: VOLUME 1 taken on Monday 19 February, 2007 at The Hague Zurich Tower (325 searchable pages)

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