Royal Dutch/Shell yesterday cut its proved oil and gas reserves for a second time in two months, plunging the company further into crisis.
The company yesterday released a detailed account of its reserves review, the investigations it faces in the US and Europe, and the actions it was taking to improve corporate governance.
The surprise announcement and hastily called press and investor conference came only a day before Shell was due to file details of its reserves with the US Securities and Exchange Commission (SEC) and release its annual report.
The announcement cuts its 2002 proved oil and natural gas reserves by a further 220 million barrels of oil equivalent, bringing the total reserves that had been erroneously booked with the SEC to 4.15 billion, or more than 20 per cent of the original reported reserves. It also reduces Shell's planned 2003 bookings by 220 million barrels.
This means the company, which has struggled compared to its peers to find new reserves, will only replace 82 per cent of its depleted stocks in 2003 rather than the 98 per cent it announced in February.
The latest miscalculation was uncovered by Ryder Scott, outside auditors hired by Shell two weeks ago. Ryder Scott found that Shell had used technology, such as seismic 3-D mapping, which was incompatible with SEC rules to determine the volume of its reserves.
The mistake - described as "disappointing and embarrassing" by Mr Malcolm Brinded, Shell's newly appointed head of exploration and production - is the latest in a string of bad news for Shell investors, who suffered a further 4 per cent drop in Shell's share price yesterday.
Mr Jeroen van der Veer, Shell's new chairman, denied for the first time allegations that he had known about the errors in judgment over booking reserves as early as 2002. He said: "The underlying question which you always get is did you know about incorrect bookings in SEC returns? The answer is no."
But Mr van der Veer and Shell are under increased pressure from probes by the SEC, the US Justice Department and regulators in the UK and the Netherlands. - (Financial Times Service)
