Eighteen months after a reserves accounting scandal rocked Royal Dutch/Shell Group, the London-based major on Thursday published updated internal rules on how it will book oil and natural gas reserves in the future. The 42-page report is designed to meet Securities and Exchange Commission (SEC) guidelines.

Last year, several internal investigations by Shell resulted in the producer recategorizing its global reserves downward several times over a year’s time by about 23%, or 4.47 billion boe (see NGI, May 31, 2004). Last August, Shell agreed to pay a total of $151 million in final settlements with the SEC and UK regulators for its overstatement of reserves over a five-year period (see NGI, Sept. 6, 2004).

“Shell’s historical practices have been updated to reflect a clearly different approach to determining SEC compliant reserves,” the company stated. “It is difficult to provide an exhaustive list of changes to the rules or this document as so much has changed primarily on proved reserves.” However, the company printed a “selective list of key recent changes or past changes” that “need to be reemphasized.”

Among other things, the company stated that “proved reserves will be determined by using deterministic methods only, fully honoring SEC directions. This is the best way to show our proved reserve estimates fully honor all elements of the SEC rules.”

Under the new rules, Shell said that for a major field of 50 MMboe or more, the final investment approval must be received before a project is booked under reserves. For smaller fields, Shell also must have evidence that similar projects are successful. All proved reserves have to be monitored at every year-end to ensure prior bookings are still valid, Shell said. Documentation of changes at the reservoir level also have to be made every year.

To review the 42-page document, visit www.shell.com.

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