By OGJ editors
HOUSTON, June 9 -- Royal Dutch/Shell Group has published its new internal policy on booking oil and gas reserves, adopted after a series of reserves writedowns.
Starting in January 2004, Shell reclassified reserves five times, reducing its estimates in proved undeveloped and proved developed categories. Most of the adjustments involved overestimates in Nigeria and the Gorgon development—linked to a proposed LNG export project—off Australia (OGJ, Jan. 19, 2004, p. 28). Ultimately, the company reclassified more than a fifth of its reserves.
The policy, published June 9 in a 41-page technical report, applies to proved reserves. Shell applied the policy to its most recent filing of reserves estimates for 2004.
"This report details the mandatory requirements for proved reserves reporting within Shell and is intended to assure compliance with rules set by the US Securities and Exchange Commission in relation to proved reserves," Shell said.
Shell emphasized its desire to fully comply with the SEC's "reasonable certainty" requirement for proved reserves, saying that major projects must be sanctioned or have final investment approval before a project's reserves will be booked.
All volumes will be reviewed every year to assure that nothing has changed to invalidate previous reserves bookings, Shell said.
"There will be no free pass for projects not being actively monitored," Shell said. "Documentation of proved reserves changes at the field [and] reservoir level must be done each year."
While some oil companies have criticized SEC reserves reporting regulations as being outdated, Shell said its accounting reforms are designed to "fully honor all elements" of the SEC rules.
"New, sophisticated analysis methods are not accepted as better, more accurate methods until they have been tied to real experience and agreed by the SEC," Shell said.
