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Shell seeks to draw a line after fourth cut in reserves


Shell seeks to draw a line after fourth cut in reserves

By Michael Harrison, Business Editor

25 May 2004

Royal Dutch-Shell, the crisis-torn oil giant, yesterday cut its proven reserves for the fourth time this year but then sought to reassure the City that it had drawn a line at last under the fiasco.

The latest downgrade means that Shell has now removed 4.5 billion barrels of oil from the proven category, equivalent to just under a quarter of its total reserves.

Malcolm Brinded, the head of exploration and production for Shell, said he was as sure as he could be that this would be the last revision to reserves estimates. “We are not planning to make further changes but you can never say never,” he added.

The scandal has claimed the jobs of Shell’s three top executives, including its chairman, Sir Philip Watts, and caused massive damage to the company’s reputation and stock-market value. However, Shell refused to say whether Sir Philip would be denied a pay-off as a result. Technically, he is entitled to three months’ pay and his pension, which stood at £479,690 a year at the end of 2002.

Shell declined to comment on a possible severance deal for its ex-chairman, saying that the matter was still under discussion by its remuneration committee. But there are indications that Shell wants to reward Sir Philip for his “long service and contribution” to the company.

He was fired in March after the board lost faith in him. A damning report drawn up subsequently for Shell’s audit committee lay much of the blame for the overbooking of reserves at Sir Philip’s feet.

Shell’s 2003 report and accounts, which will be published and sent to shareholders this Friday, will contain no reference to what pay-offs, if any, are being given to Sir Philip and the two other executives fired by Shell ­ the former head of exploration and production Walter van de Vijver, and its former finance director Judy Boynton.

The latest downgrade amounts to 103 million barrels and relates to Shell’s Canadian operations. Together with earlier revisions, it brings the volume of oil reclassified by Shell to 4.47 billion barrels, leaving it with 14.35 billion barrels or 10.2 years- worth of production. Shell is being investigated by regulatory authorities in three countries over the downgrade and is facing possible criminal charges from the US Justice Department.

Jeroen van der Veer, the new chairman, said Shell was co-operating fully with regulators and moving “as fast as we can” to deal with the investigations and lawsuits it is facing. Mr van der Veer also said Shell was looking to strengthen its board with further appointments to its ruling committee of managing directors. He also promised an update on plans to overhaul Shell’s corporate structure at the AGM on 28 June.

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