Sydney Morning Herald: Shell rubs out 4bn barrels 

January 12, 2004

Royal Dutch/Shell is reducing its proven oil and gas reserves by 20 per cent, in a surprising announcement that raised questions about the company and the tabulation of oil and gas reserves throughout the industry.

The disclosure on Friday sent the stocks of the two companies that control Shell, Europe's second-largest oil company, plunging more than 7 per cent and left some analysts with doubts about its outlook.

Shell officials, in a statement and a telephone conference call, said that a review begun in the fourth quarter of last year led to movement within the categories of the company's oil and gas reserves, cutting the amount classified as proven reserves by 3.9 billion barrels to the 15.4 billion barrels of crude oil, gas liquids and natural gas.

Almost 50 per cent of the reduction came from projects in Nigeria and Australia.

Locally, Woodside Petroleum said it should not be affected by the revision, which in this region centred on the Gorgon gas development off the West Australian coast.

Woodside isn't involved in the project but Royal Dutch/Shell is Woodside's biggest shareholder with a 34 per cent stake, and the pair are partners in several large projects, including the North-West Shelf.

Woodside spokesman Rob Millhouse said yesterday that "there shouldn't be (any impact). It is really a reserve accounting matter".

While Shell is the major shareholder in Woodside, the Perth-based company was a separate entity from Shell and did not necessarily follow the same method for determining its reserves, Mr Millhouse said.

Shell's statement said that the change came after a review of previously booked reserves against an updated company-wide standard.

Acknowledging that proven reserves must be reported to the Securities and Exchange Commission, Shell executives said they had released the new information to the public as quickly as possible.

They also said that securities rules allowed room for judgement in determining proven reserves. The company said proven reserves were oil and gas resources that were reasonably certain to be produced.

Officials said the reduction would have "no material effect" on the company's financial statements for any year, including 2003. And they said they expected the reserves in question would eventually be moved into the category of proven reserves.

These statements did not seem to reassure investors or analysts.

Merrill Lynch immediately cut its stock rating on Shell, and analysts at Goldman Sachs said in a report that "this raises significant concerns with respect to the credibility of the company's underlying operational performance".

The New York Times

http://www.smh.com.au/articles/2004/01/11/1073769450978.html

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