ChannelNewsAsia.com: Accountant warned Shell of reserve overestimates in 2002

Posted: 10 April 2004   

THE HAGUE : Anglo-Dutch oil giant Royal Dutch/Shell was already warned 18 months ago about the dangers of linking management bonuses to oil and gas reserves, the NRC-Handelsblad newspaper revealed.

Shell is in the throes of one of its most difficult periods, following an announcement on January 9 that it had overestimated its proved oil and gas reserves by 3.9 billion barrels, or one-fifth.

The shock move and lack of clear explanation angered investors, and led to the departure of chairman Philip Watts as well as the head of exploration and production, Walter van de Vijver.

According to papers obtained by the Dutch NRC-Handelsblad an accountant at a conference in Norway in September 2002 "issued a serious warning ... that the objectivity of (reserve) estimates would be compromised if they are linked to the assessment of managers and directors".

According to NRC-Handelsblad, bonuses linked to oil and gas reserves made up five to 15 percent of annual salaries at the company in recent years.

Shell is currently being investigated by the SEC, the US financial regulator, and the British watchdog, the Financial Services Authority, is also understood to have begun an informal inquiry into the issue.

The 2002 memo could serve to show that Shell management had been aware of overestimates of its reserves a long time before taking action against it.

http://www.channelnewsasia.com/stories/afp_world_business/view/79556/1/.html