THE BUSINESS (UK): It may be too early to celebrate Shell going Dutch: “Although rescued by the booming world price of oil, the third-quarter figures were accompanied with the disclosure that there are still some 900m barrels worth around $450m (£24.3m, €351m) of questionable reserves sloshing around in Shell books.” (ShellNews.net)

BENCHMARK

EDITED BY GRANT CLELLAND

31 Oct 04

ROYAL Dutch Shell's dual structure has been blamed on most of the oil giant’s troubles ranging from poor management to dodgy oil reserve accountancy.

So its decision to meet shareholder criticisms by unifying its two holding companies - Shell Transport and Royal Dutch - and create a single entity with one board of directors is to be welcomed.

Although that news seemed to please the punters, it's too early to celebrate. Shell has gone farther than a forced marriage of two partners. Its plans include moving its headquarters from London to Amsterdam, and it harder to see any financial logic in that. Unlike   

Rupert   Murdoch's   plan (approved by shareholders last week) to transfer his News Corporation media empire from South Australia to the US state of Delaware to give it better access to capital markets, there's no similar gain for Shell in concentrating on Amsterdam while it intends to retain its London listing.

Both the chairman and chief executive of the new single-structured group will be Dutch. This, and the move to Amsterdam, is clearly a sop to the Dutch directors who objected to any power shift to the UK where, it has to be said, Shell's British management had done a pretty lousy job in recent years.

Much to the relief of Shell, the shares of both divisions moved up on the announcement, Shell Transport's by around 6% and Royal Dutch's by almost 4%.

The restructuring details accompanying news of solid third-quarter results had been brought forward by a month or two--and those of a suspicious mind quickly spotted the reason. This had nothing to do with Shell's ridiculous claim that it had taken the board less time than expected to reach a decision. Although rescued by the booming world price of oil, the third-quarter figures were accompanied with the disclosure that there are still some 900m barrels worth around $450m (£24.3m, €351m) of questionable reserves sloshing around in Shell books. On its own that would have been enough to knock the shares of both companies for six.

Shell remains a strong company. As The Business predicted on Page 1 last week, its third-quarter results were marginally better than those of the mighty BP whose production was down 9% for the quarter. The new structure will improve accountability, boasted Shell. As the Securities & Exchange Commission (SEC) is still monitoring the situation closely, it is to be hoped that it does.