Private Investor: I've lost in the Shell game, and I'm not alone. So will the chairman quit?

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The Independent Online

I have at least three things in common with Phil Watts, the chairman of Shell. First, we both went to the same distinguished educational institution in Leicester, the Wyggeston grammar school for boys, as it was known.

Second, we both work or have worked for Shell, admittedly in radically different capacities (I was a graduate trainee, you know). Third we are both shareholders in the company, although then again I have to say his stake is rather bigger than mine.

But I do not have to face incessant calls for my removal from office, at least not in public. It must be a pretty grim sort of experience, so I have some sympathy for Phil, on a personal level. I do rather wonder, though, whether some of the criticism isn't justified.

Over the past few years Shell has been a rotten investment. I bought about six years ago at 450p and they are now languishing nearly a pound off that. Subsequent purchases on short-terms lows aimed at averaging down the buying price are also pretty much underwater

That matters for the small army of private shareholders who have chosen to invest directly in the shares of this supposedly steady blue chip. It also matters to the many more who buy into the broadly based investment trusts, unit trusts and OEICs that are the bedrock of the consumer investment industry. So my shares in Foreign and Colonial Investment Trust, for example, are partly invested in Shell, an additional source of exposure to the oil giant's fortunes.

There must be millions more people in this country who have a stake in the financial success of Shell, although they don't know it, through their pension funds. So when Shell doesn't go well, it matters. In those circumstances, I think Shell's chairman really ought to go.

As I have written many times in this column before, those of us at the bottom of the economic pile know only too well the penalties of poor performance in our jobs. If a Shell garage attendant had been as hopeless at their job as Phil Watts they'd have been handed their P45 long ago. When Shell confessed in January that it had overestimated it oil and gas reserves by a fifth, the news knocked more than £10bn off its stock market valuation, or about 7 per cent of the capitalisation (and the value of my stake too).

The disclosure meant that meant the group's reserves had shrunk from 13 years' worth to less than 11. Imagine if your local petrol station manager had miscalculated how much unleaded was in the pumps by that margin of error. Enough said, I think.

The question now is whether Shell shares are actually so cheap at 350p to 360p that they are worth taking a further punt on. Is the bad news over? The company-specific disappointments may well be, but that is bad enough.

Shell's reserves are shrinking at a rate of 2 per cent per annum. The wider prospects are a difficult as ever to judge, although I would have thought the dollar ought to bottom out soon. The snag for me is that having just paid my tax bill for 2002-03 there isn't much left to play with for now.

In the meantime, I'll have to live for Mr Watt's unreserved apology to Shell shareholders. One thing we can all be sure about is the trend in interest rates. It is a very welcome news, of course, for savers, who have suffered badly in recent years. At least it might make saving rather than borrowing seem like a remotely sensible idea again.

I just wonder whether, when the economic historians get around to examining the Gordon Brown-Eddie George era properly, they will conclude that the pair of them contrived to keep UK interest rates far too low for far too long.

All around the world everyone from George Bush to your next-door neighbour with her new Clio seems to be racking up debt on an unprecedented scale. The wonder of it is that all this has been going on with subdued rates and inflation for so long.

But sometime there has to be a reckoning and downturns usually come out of a clear blue sky. How will Shell survive that, I wonder? How will I survive that, I wonder?

s.o'grady@independent.co.uk

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