FINANCIAL TIMES: DEBATE RUMBLES ON OVER CALCULATION OF PROVED RESERVES “BP had said… it replaced 78 per cent under the same Securities and Exchange Commission rules… Using the same guidelines, Royal Dutch/Shell replaced 15-25 per cent of its used reserves.” (ShellNews.net) 10 March 05

By James Boxell

Published: March 10 2005

The debate about calculating proved reserves rumbles on in BP's annual report, published this week, which shows it only replaced 64 per cent of the oil and gas it extracted last year under US regulations, writes James Boxell.

BP had said previously it replaced 78 per cent under the same Securities and Exchange Commission rules, but this did not include disposals and acquisitions. Using the same guidelines, Royal Dutch/Shell replaced 15-25 per cent of its used reserves. Exxon-Mobil replaced 83 per cent, but it does not strip out joint ventures.

BP's figure does not include Russia's TNK-BP, which accounts for a quarter of its production.

Reserve replacement is a crucial gauge of oil company health and determines whether their asset base is shrinking. SEC rules force companies to use year-end oil prices when calculating reserves, which lowers the figure. BP and Exxon prefer to use their long-term investment planning price of $20, which would lift replacement rate.