Shell chief 'told of reserves shortfall in 2002'

The heat was intensifying under the former chairman of Shell yesterday following reports that Sir Philip Watts was warned that oil reserves were being overbooked two years before the company publicly disclosed the fact.

According to a report in the Wall Street Journal, memos circulated in early 2002 to senior Shell directors including Sir Philip cautioned that the Anglo-Dutch company's reserves booking methods appeared to be inconsistent with guidelines laid down by the US Securities and Exchange Commission.

The memos, said to have been written by managers within Shell's exploration and production division, warned that the company's proven reserves might need to be cut by about one billion barrels.

Shell fired Sir Philip and Walter van de Vivjer, its current head of exploration and production, last week after the board "lost confidence" in them. The company said the sacking of the two directors had stemmed directly from the "facts and circumstances" of Shell's disclosure in January that it had cut its proven reserves by 20 per cent or 3.9 billion barrels.

The group's audit committee is now conducting an investigation into the reserves downgrade, due to be completed in the next few weeks, and Shell has pledged to make its findings public.

When the reserves downgrade was announced on 9 January, Shell said it had stemmed from a number of in-depth reserves studies and then a group-wide review undertaken in the fourth quarter of last year.

In a subsequent letter to staff a week later, Sir Philip said information about the reserves downgrade had been released "at the earliest possible time after the recategorised reserves had been quantified with some certainty".

However, yesterday's press report said there had been a "trail of communications" about the need to reclassify reserves dating back to early 2002.

In a conference call last Friday, Shell's new chairman, Jeroen van der Veer, declined say whether Sir Philip and Mr van de Vivjer had acted improperly or illegally. In response to repeated questioning, he would say only that the board had lost confidence in the two.

The overbooking of reserves took place over a six-year period between 1996 and 2002. For most of that time, Sir Philip was head of exploration and production for Shell. He became chairman in 2001.

Shell refused to comment on the claims that Sir Philip and other senior directors had been warned about the overbooking of reserves as long ago as early 2002. "We are not privy to the work of the group audit committee review and it would be inappropriate for us to comment or speculate," a spokesman said.

However, other sources said it was unlikely that the extent of the problem would have been covered up for two years. It was also pointed out that the memos would have been widely circulated among the directors and senior management of Shell, and not just sent to Sir Philip.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links