Shell’s Overstatement Could Be Three Times Larger

According to this article Shell was trying to assist Nigeria in increasing their quotas by overstating their oil reserves. Countries with larger proven reserves can have larger production quotas.

Shell Concealed Extent of Its Problems to Protect Nigeria Partnership
International Herald Tribune Friday, March 19, 2004

The Royal Dutch/Shell Group has kept secret key details of its sharp reduction of oil and gas reserves for fear of damaging its close ties to Nigeria, whose oil production quota set by OPEC might be jeopardized if the facts were disclosed, internal company documents show.

Nigeria is seeking a significant increase in its quota with the Organization of the Petroleum Exporting Countries, which sets production levels for its members in an effort to control prices. A lower quota would mean less income for Shell and Nigeria and less Nigerian oil for the United States, the largest customer for its exports.

Since Shell disclosed two months ago that it had overstated its oil and gas reserves by 20 percent, or 3.9 billion barrels, the company’s senior executives have pledged greater openness to investors, who were stunned by the revelations.

he company announced Thursday that it was again cutting its estimates of its reserves by the equivalent of 250 million barrels, mostly involving a natural gas field near Norway. Shell also postponed the publication of its 2003 annual report for two months to complete a review of its oil and gas assets.

But the company continues to conceal the extent of its problems in Nigeria, the country with the largest reserve restatement, to avoid endangering its partnership. Shell operates the largest joint venture with the Nigerian government. Confidential company documents late last year show that more than 1.5 billion barrels, or 60 percent of Shell’s earlier estimate of proven Nigerian reserves, were not fully compliant with accounting rules and company guidelines.

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