MoneyCNN.com: Shell blames ex-execs for reserves

Embattled oil and gas firm's audit committee places blame on former chairman and exploration chief.

April 12, 2004: 7:06 AM EDT  

LONDON (Reuters) - Royal Dutch/Shell's audit committee in a draft report has blamed the overbooking of energy reserves by the oil firm mostly on its ex-chairman and a former exploration and production chief, according to a published report Monday.

The draft report, which has not been approved by Shell's (SC: Research, Estimates) two parent companies, does not recommend further changes to the Anglo-Dutch company's senior management, the Wall Street Journal reported, citing two people familiar with the matter.

The world's third biggest oil company fired Chairman Philip Watts and former exploration and production chief Walter van de Vijver early last month, amid revelations that proved reserves had been overestimated by more than 20 percent.

U.S. regulators, meanwhile, have stepped up legal probes into the issue.

A Shell spokesman said he could not comment on the draft report's details.

Shell's decision earlier this year to slash its proved reserves sent shockwaves through the industry, cost its two top bosses their jobs, and wiped billions of dollars off its stock market value.

U.S. newspapers have since reported that the two fired executives knew in 2002 that reserve estimates were at odds with Securities and Exchange Commission guidelines.

The draft report said that Watts and van de Vijver failed to divulge the reserves problems early enough, the Journal said, citing a person familiar with the situation.

The Shell spokesman said that once the review and the report were finished, the conclusions would be made public.

"As previously stated, the group audit committee review is being conducted by an independent outside law firm at the request and under the auspices of the group audit committee," he said.

"Once management has had the opportunity to properly and thoroughly review the contents and implications of the group audit committee's final report, we plan to make public its main conclusions," he added.

Lawyers at the firm conducting the review could not be reached for comment.

Shell appointed Jeroen van der Veer, former head of chemicals, as its new chairman, and Malcolm Brinded as the new head of Exploration and Production (EP).