The Daily Telegraph: Shell examiner points finger at SEC
By Christopher Hope, Business Correspondent (Filed: 26/03/2004)
The consultant brought in to double-check the amount of oil and gas owned by Shell has criticised the international benchmark used to measure reserves.
Ronald Harrell, executive chairman of the Ryder Scott Company, said a definition used by the Securities and Exchange Commission was 26 years out of date. He said new technology provided a much more accurate picture of how much recoverable oil or gas was in the ground.
Mr Harrell said the industry had changed since 1978, when the SEC decided on its definition of proven reserves. He pointed out that 3D imaging techniques can provide horizontal and vertical pictures of underground reserves.
In contrast, the SEC demands that individual wells are bored before a company states whether the oil or gas is proven or not.
Mr Harrell said: "The SEC has a more cautious approach. Those guidelines have little use outside the regulating reporting process for which they are used."
It was not up to the SEC to produce a "company valuation", but to ensure that oil and gas companies use the same method of calculating proven reserves. "They will tell you that their primary purpose is for the protection of investors. They are doing their jobs under the guidance put to them."
Mr Harrell stopped short of calling for the SEC to overhaul its methods, suggesting instead that it was up to "the regulated parties" - the oil and gas companies - to demand any changes.
Mr Harrell declined to comment on his company's involvement in Shell. Ryder Scott has a team of 30 consultants working at Shell's headquarters in London to check its levels of proven reserves.
The Anglo-Dutch oil major announced in January that it had overstated its proven oil and gas reserves by 20pc, or 3.9billion barrels. That figure rose to 4.1billion barrels in an update last week, when more barrels were cut from 2003 proven reserve estimates.
Yesterday Shell signed a deal with Libya's National Oil Corporation to explore for oil and gas. A $200m natural gas project is likely to follow.
Heads of agreement were signed in Tripoli by Malcolm Brinded, Shell's head of exploration and production, and Abdalla S El Badri, NOC's chairman.