Royal Dutch/Shell withheld information about a big reduction in its oil and gas reserves in Nigeria for fear of damaging its business relationship with the government, the New York Times reported today.
Shell cut its oil and gas reserves estimate for the second time this year yesterday - a fresh blow to investor confidence after it first cut the reserves by 20 per cent in January.
Citing internal company documents from late last year, the Times said Shell had concluded that 1.5 billion barrels, 60 per cent of its Nigerian reserves, did not meet accounting standards for proven reserves.
A December 8th report prepared by Mr Walter Van de Vijver, then-head of exploration and production, recommended the revised Nigerian reserve remain "confidential in view of host country sensitivities," the Times reported.
Mr Van de Vijver and then-chairman Mr Philip Watts were both ousted after the January revelation of overstated reserves.
Revealing the extent of Shell's lowered reserves in Nigeria could affect the country's quota discussions with the Organisation of Petroleum Exporting Countries (OPEC), the Times said, quoting the December report.
Nigeria wants a quota increase from OPEC as part of a plan to double its daily production in the next several years.
The Times quoted the report as saying the publication of too much information about Nigerian reserves could also jeopardise the company's negotiations with the country over $385 million in bonus payments.
Shell's senior managers were told in December that 720 million barrels in Nigeria were non-compliant with guidelines established by the Securities and Exchange Commission, and another 814 million barrels were potentially non-compliant, the Times said.
Shell recorded 2.524 billion barrels of proven reserves in Nigeria at the end of 2002. But after reviews and tightening of company guidelines, only 990 million barrels fully complied with the rules, according to the December report.
Nigeria has approached OPEC for an extra allowance, but other members have rejected the idea, arguing it would lead to a race for investment that would depress oil revenues across the Middle East-dominated cartel.
Nigeria's OPEC quota currently stands at two million barrels per day, 7-8 per cent of the OPEC ceiling. Actual Nigerian output is already near 2.5 million barrels and rising towards four million by the end of this decade.