BP torments Shell with oil reserves revision

BP admitted yesterday that it too had misled investors about the size of its oil and gas reserves. Unlike its rival Shell, however, BP has been underestimating them.

BP admitted yesterday that it too had misled investors about the size of its oil and gas reserves. Unlike its rival Shell, however, BP has been underestimating them.

In a filing to the US Securities and Exchange Commission, BP said that its proved reserves were 23 million barrels higher than stated in the company's 2003 annual report and were now estimated to be 18.361 billion barrels. The announcement, coming just a day after shareholders in Shell attacked the "abysmal" performance of their company, served to highlight again the gulf between the two oil producers. Brokers at the investment bank CSFB advised investors to switch out of Shell and into BP.

BP said the upward revision of reserves from the 18.338 billion barrels stated in its annual report was "immaterial". It said the revision had been prompted by price movements and changes in the way it interpreted SEC regulations relating to field fuel gas and the use of technology in determining reserves.

However, BPs figures include a more bullish estimate of reserves in Ormen Lange than some of its partners in the Norwegian gas field. Norsk Hydro yesterday revised its booking of recoverable reserves in the field to below 50 per cent from 70 per cent, while BP has maintained its figures at 80 per cent. BP has a 10 per cent stake in the field.

Whereas BP's reserves replacement ratio ­ the rate at which production is being replaced by new discoveries ­ is comfortably in excess of 100 per cent, Shell's is languishing at 63 per cent. Shell has been forced to cut its estimate of proved reserves by 4.5 billion barrels or 23 per cent since the start of the year. The fall-out has seen three top directors lose their jobs.

Malcolm Brinded, the head of exploration and production at Shell, admitted at Monday's annual meeting that a replacement ratio of less than 100 per cent was unacceptable. Investors left the meeting nonplussed after Lord Oxbrough, the chairman of Shell's UK side, failed to shed further light on plans to overhaul the corporate governance structure.