Memos cite Shell reserves shortfall

[Judi Lynn]

Posted on Tue, Mar. 09, 2004

Memos cite Shell reserves shortfall

By Stephen Labaton;Jeff Gerth

The New York Times


WASHINGTON - The new head of the Royal/Dutch Shell Group and its current chief financial officer, as well as the chairman ousted last week, learned of huge shortfalls in proven oil and natural gas reserves in 2002, two years before their public disclosure, according to company memorandums and notes of executive discussions.

But rather than disclose the problems to investors, senior executives came up with what is described in a July 2002 memorandum as an "external storyline" and "investor relations script" to "highlight major projects fueling growth," "stress the strength" of existing resources and minimize the significance of reserves as a measure of growth.

Senior executives also discussed problems with reserves months earlier.

A February 2002 memorandum said that a billion barrels of reserves "are no longer fully aligned" with Securities and Exchange Commission rules because the agency had clarified them. The memorandum termed an additional 1.3 billion barrels of reserves at risk because the company could no longer ensure their extraction during the remaining term of licenses between it and three foreign countries.
(snip/...)

http://www.dfw.com/mld/dfw/business/8141137.htm

[htuttle]

1. Apparently, the 'proven' gas and oil reserves...

...are not so proven after all.

[Papa]

3. Maybe the Oil industry is doing an Enron on us

and if they are, why would they inflate the #'s on purpose and for what purpose? Just thinking out loud...

[htuttle]

5. According to a number of industry experts/watchers...

..Nearly every party involved exaggerates reserve numbers.

Oil companies exaggerate them to make stockholders happy.
OPEC exaggerates their reserves to make OPEC more powerful.
The US exaggerates non-OPEC reserve figures to keep OPEC from feeling too powerful.

Almost all the increases in oil reserves since the 1970's have been due to accounting changes (ie., Enronititis), rather than new discoveries.

[Caution]

2. hmmm...what is the solution to this?

Invade an Oil rich country and simply take it over...

[ctex]

4. Notice that Shell is blaming others for its problem

An SEC "rule clarification" took one billion barrels off the books and upcoming license expirations took 1.3 billion barrels off the books. In the latter case the oil reserves may be there, but the ownership flips back to the host countries -- i.e., the reserves remain proven, but Shell would no longer own them.

[Oreegone]

6. Hey what's going on?

I thought we were gonna let them all police themselves....what are we complaining about now???? I say sarcastically.