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Simon Henry and the reserves time bomb

Were they aware that Simon Henry was a key player, as Head of Global Investor Relations, in dealing with the reserves data and actually had responsibility to ensure the quality/accuracy of the data before it was disclosed to analysts and investors? As we all know, it turned out that some of the data was not only inaccurate, but fraudulent. He had been warned that a Gorgon 600 million BOE reserves booking was an IR time bomb.

Introduction: A draft of the article below was supplied to Shell in advance, namely to Mr Michiel Brandjes, the Company Secretary & General Counsel Corporate of Royal Dutch Shell Plc and the CFO, Mr. Simon Henry. We invited Shell to point out any factual inaccuracy and/or supply comment for unedited publication with the article. No response other than an automated message has been received.


By John Donovan

On 13 March 2009, the Financial Times published an article about Simon Henry, who was about to become Chief Financial Officer of Royal Dutch Shell Plc. It said that he had survived the reserves misreporting scandal with his reputation intact. I wonder how much investigation of the facts was undertaken before arriving at that conclusion?

Were they aware that Simon Henry was a key player, as Head of Global Investor Relations (IR), in dealing with the reserves data and actually had responsibility to ensure the quality/accuracy of the data before it was disclosed to analysts and investors? As we all know, it turned out that some of the data was not only inaccurate, but fraudulent. He had been warned that a 600 million BOE Gorgon reserves booking was an IR time bomb.

Did the FT know that at times Simon Henry acted as a go-between in the acrimonious relationship of his warring bosses, Sir Philip Watts and Walter van de Vijver, who famously said he was sick and tired of lying about “far too aggressive/optimistic bookings”?  Are we to assume that neither of these individuals shared any secrets or concerns with Mr. Henry about what was going on?

We have already published forthright comments Mr. Henry made about Watts and Shell EP Chief Walter van de Vijver.

The integrity and competence of Mr. Henry has considerable importance because having taken over the CFO role from Peter Voser, after Voser became Chief Executive, Simon Henry is a strong contender to eventually succeed Voser in the top role. Mr. Voser has himself been tainted by scandal following his years at UBS, another multinational known for tax dodging and fraud. After Moody-Stuart, Watts, van der Veer and Voser, it would be a novelty for Shell to have a Chairman/CEO who is not tainted by scandal. Is it impossible to find one?

I have provided a link to a 9 page extract from a 301 page sworn video-taped deposition given to the U.S. Securities & Exchange Commission by Simon Henry on Tuesday 19 October 2004 in Washington D.C.

The focus in this 9 page section is on exhibit 254, a chain of email correspondence apparently from early in 2003, a year before news of the reserves fraud broke. The particular email being discussed was one Mr. Henry sent to one of his staff, Rhea Hamilton and to Frank Coopman, the Dutchman who later blew the whistle on the reserves fraud. It was also copied to other members of the Henry team. John Pay, Shell’s reserves coordinator, was also a participant in the correspondence.

Mr. Henry was aware that 600 million BOE (barrels of oil equivalent) had already been booked for the Gorgon gas project ahead of a Final Investment Decision. It seems he had concern over the booking and was seeking some kind of confirmation. 

It is relevant to note that Mr. Henry had discussions apparently at about the same time (in February 2003) with Walter van de Vijver – known in the company as “The Tall Angry Dutchman” – about the same subject. The booking of Gorgon reserves.

However, Mr Henry confirmed in his deposition that he had not brought the issue to the attention of Sir Philip Watts (or Shell CFO Judith Boynton). He could not explain his failure to do so, saying that “it was not always the easiest thing to do to tell him things like that.”

(There is evidence that Mr. Henry withheld important related information from his bosses on a number of occasions.)

The SEC interrogator pointed out that de-booking would have caused a 40 percent drop in the reserve replacement ratio and said that surely Mr. Henry would have told Watts if he did not think he already knew about it?

It was established during the interrogation that John Pay had commented in bold print within the correspondence: “Therefore, the reserve replacement ratio impact will at best be zero in the short to medium term.”… “This is something of an IR time bomb.

Mr. Henry was asked if this warning was accurate.

He agreed that it  was an issue and there would be a negative reaction in the market at the point reserves for that year were made public. 

The discussion on the subject of an IR time bomb ended with the following exchange:

Q: So, would you agree with Mr Pay’s comment that this is something of an IR time bomb? Do you think that an accurate statement?

A: It’s an overstatement but, yes, it’s an IR issue for the future, all other things being equal.

What this incidence shows is that Mr Henry was aware of the controversy/uncertainty over Shell reserves at least a year before that crucial information was disclosed to Shell investors. We will publish evidence that he actually knew early in 2002.

It is not as clear cut as the situation with Chris Finlayson, where there was absolute proof that he was either part of the reserves cover-up, or negligent in his fiduciary duties as a senior Shell executive. However, many questions remain concerning the involvement and competence of Mr. Henry.

The booking of the Gorgon reserves became a major element of the whole reserves scandal. Exxon Mobil and Chevron Texaco did not book their share of the Gorgon gas field with the SEC. Only Shell listed the Gorgon reserves.

THE NINE PAGE EXTRACT (So all of the above can be read in context)

More articles about the involvement of Mr. Henry in the reserves scandal will follow.


The Guardian: Shell forced to make fourth downgrade: Shell shocked investors in January when it first cut its proven oil and gas reserves by 20% – mainly in Nigeria and on Australia’s Gorgon field. Since then it has gradually downgraded them further, with figures for the Ormen Lange field in Norway being changed to realign them with SEC requirements.

ENP: Shell could move on Woodside, book Gorgon reserves: Gorgon was one of the assets at the centre of the Royal Dutch-Shell reserves booking scandal.

Forbes: Shell Shocked: In Australia it booked 500 million BOE from the Gorgon gas fields, even though it hadn’t yet decided to invest in the project. 14 August 2006


The questionable status of Gorgon was re-visited at several points, beginning with the January, 2000 decision – reviewed in a presentation to EP Excom attended by Sir Philip – to “freeze” the booking despite a 20% increase in technical reserves. In October, 2000, the Group Reserves Auditor affirmed this “freeze” status, against a local technical opinion in favor of debooking. While debooking continued to be debated, no action was taken until January, 2004. In the words of the current Group Reserves Coordinator, Gorgon had long “stuck out like a sore thumb,” but, at over 500 million boe, debooking of the reserve was “too big to swallow.”

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