THE WALL STREET JOURNAL: Shell Adopts New Rules On 'Proven' Oil Reserves: “Royal Dutch/Shell Group Thursday published new internal rules on booking oil reserves that were revised to meet U.S. regulatory guidelines and help put behind it a scandal that unfolded last year”: 9 June 2005:
DOW JONES NEWSWIRES
LONDON -- Royal Dutch/Shell Group Thursday published new internal rules on booking oil reserves that were revised to meet U.S. regulatory guidelines and help put behind it a scandal that unfolded last year.
The Anglo-Dutch oil major -- which has cut its estimate of reserves by more than a third in the past year and a half -- had been criticized for some of its former accounting practices, such as booking reserves on projects in which investment plans hadn't been approved.
Under its new rules, for a major field of 50 million barrels of oil equivalent or more, final investment approval must happen before the project is booked in its reserves, Shell said. For smaller fields, Shell also must have evidence that similar projects have come to fruition.
It said all proven reserves must be reviewed at year-end to make sure the bookings are still valid. Documentation of changes at the reservoir level must be carried out each year.
Last July, the company agreed to a $150 million settlement with the U.S. Securities and Exchange Commission and the United Kingdom's Financial Services Authority following a string of restatements. Shell didn't concede to allegations that it had boosted its numbers artificially, but the company remains the target of related class actions in the U.S.
Unlike other oil majors who recently sponsored a study criticizing the SEC's reserves-accounting standards as obsolete, Shell appears to consider the guidelines as pertinent. "The SEC requirement of 'reasonable certainty' represents the rationally high standard of evidence/confidence consistent with the meaning of the word 'Proved,' " it said in the report.
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