The Financial Times: Shell to face grilling over reserve levels

By Astrid Wendlandt and Rebecca Bream in London

Published: March 21 2004 19:48 | Last Updated: March 21 2004 19:48  

One of Britain's most powerful shareholder groups will grill Royal Dutch/Shell's directors on Monday about the true level of the oil company's reserves.

The Association of British Insurers, which represents some of the UK's largest investment companies, is expected to meet several non-executive directors from Shell's UK arm, including Lord Oxburgh, its newly appointed chairman.

The group cut its reserves last week for the second time in three months, fuelling fears that more could follow, and has been forced to delay publication of its annual report and accounts by two months pending a full audit of its reserves by Ryder Scott, the independent consultancy.

The oil group is not ruling out more downgrades.

Earlier this month, the board asked Sir Philip Watts, chairman, and Walter van de Vijver, head of exploration and production, to resign after it was no longer able to say the erroneous bookings had been made "in good faith".

The ABI, along with other shareholders, is concerned about corporate governance at Shell. It said yesterday: "We are in a dialogue with Shell."

Shell is under investigation by the US Securities and Exchange Commission, the US Justice Department and regulators in the UK and the Netherlands. Several current and former directors could be facing a series of class-action suits from the US.

Shell on Sunday denied reports that auditor KPMG had refused to sign off its accounts, which were due to be published last Friday, because of concerns over inaccurate information.

A Shell spokesman said: "The accounts were not presented to the auditors because of the delay with respect to the reserves data. The decision was made by the board not to publish the accounts pending . . . completion of the reserves review."

Last week's announcement cut Shell's proved oil and natural gas reserves for 2002 by a further 250m barrels of oil equivalent, bringing the total of erroneously booked reserves to 4.15bn, or more than 20 per cent of the originally reported figure.

The SEC is investigating an earlier reserves downgrade in February. Shell also reduced its planned 2003 bookings by 220m barrels. This means the company - which has struggled to find new reserves - will have replaced only 82 per cent of its depleted stocks in 2003 rather than the 98 per cent it announced in February.

Shell on Sunday said it had met with about half of shareholders so far and its "listening phase" would continue until the group's annual meeting on June 28