THE BUSINESS: Shell scandal prompts industry call for new test of reserve auditors
“Reports into the Shell scandal by the SEC and the UK’s Financial Services Authority (FSA) “… also drew attention to the way the job of verification rested with a single, semi-retired Shell geologist, who was not given enough resources for the task. As a result, the committee is also setting up an ethics committee to devise professional standards similar to those used in the legal and accounting professions.”
BLOOMBERG
By Richard Orange
3rd/4th October 2004
THE oil industry is planning a professional qualification for auditing companies’ oil and gas reserves, in a move designed to steer the US Securities and Exchange Commission (SEC) away from plans to force companies to have their claims verified by independent consultants. At present there is no professional standard or methodology for reserves auditors.
Confidence in the oil industry’s claims of what it has in store beneath the ground was severely dented after Royal Dutch/Shell slashed its claimed oil and gas reserve estimates by 23%, primarily because the numbers failed to meet SEC guidelines. Shell’s revision was followed by similar cuts from US independents Forest Oil and El Paso, but did not trigger the industry-wide epidemic feared at the time.