Royal Dutch Shell Evaluation of Oil Reserves — страница 3

reserves will have immediate and substantial consequences on company’s balance sheet. Especially when the restatement involves restatement of about a third of the existing oil and gas reserves as it was in case of the latest scandal. The consequences of the scandal were also reasonably large for the oil industry as a whole. Although, Shell only produced some 3% of world oil and 3.5% of oil gas, it held some 9% of proved oil reserves in 2003 (BP, 2004). Given the degree of dispersion in the industry this is still one of the biggest oil producers in the world. There is another reason why restatement of oil reserves by Shell had consequences for the oil industry. To see this one should look at the data in Table 1.1: Company Production (mbbl) (oil only) Company Proved Reserves

(mbbl) (oil only) Saudi Arabian Oil 3055 Saudi Arabian Oil 259300 National Iranian Oil 1385 Iraq National Oil 112600 Petroleos Mexicanos 1299 National Iranian Oil 99060 Petroleos Venezuela 1193 Kuwait Petroleum 96500 RDS 810 Abu Dhabi Oil 92200 Nigerian Petroleum 766 Petroleos Venezuela 77783 PetroChina 763 Oil Corp Libya 29500 Kuwait Petroleum 745 Petroleos Mexicanos 25425 Iraq National Oil 715 Nigerian Petroleum 24000 BP 677 Qatar Petroleum 15207 Lukoil 570 Lukoil 14243 Abu Dhabi Oil 568 PetroChina 10959 TotalFinaElf 530 Yukos 9630 Oil Corp Libya 496 RDS 9469 Petroleo Brasileiro 485 Sonatrach 9200 Pertamina 438 Petroleo Brasileiro 7749 Yukos 362 BP 7217 Petroleum Dev. Oman 329 ToalFinaElf 6961 ENI 312 Petroleum Dev. Oman 5524 Sonatrach 285 Sonangol 5412 (Source: OGJ, 2003) The

table shows top 20 oil producing companies and reserves leaders in 2003. One can see that the number of Western companies in the list is rather limited and that in both cases RDS is ranked one of the biggest among Western or Russian oil companies, which are precisely the companies listed on the stock exchanges and included in the major indexes. Thought RDS is not the market capitalization leader, restatement of its reserves would most probably have an influence on any market index constructed out of oil companies’ stocks. This fact will have its implication, as the event study will be conducted in Chapter 3. It can be added that before the restatement Shell’s reserves life ratio (i.e. quantity of reserves divided by yearly production) was about 15 years, which is just

slightly smaller than 17, the average number for Europe and Eurasia, where most of Group’s reserves and production are concentrated. After the restatement, the ratio fell to only 10, which puts Shell into disadvantaged position in comparison to other companies in the industry (BP, Royal Dutch Shell: Evaluation of Oil Reserve 2004). Just for comparison, one can take a look on Table 1.2, where the reserve life in different world regions is summarized: Region N.America Eurasia M.East Africa S.America Asia Pacif. Reserves Life 12 17 88 33 41.5 16 (Source: BP, 2004) The huge numbers of Middle East and South America can rather be ignored as most of the reserves there are owned by the local state run companies, but it still does not make the overall position of Shell in comparison

to industry average much better. Now as the degree to which the restatement of oil reserves could influence the standing of RDS and the oil industry as the whole becomes clearer, let us take the first look at one of the issues directly affected by this restatement, namely at Shell’s ownership structure. To do this one should first turn to the group’s history. The partnership of Royal Dutch and Shell dates back to 1907, when sir Marcus Samuel, than Chairman of deeply indebted Shell Transport and Trading Company, stuck the deal with Royal Dutch Oil Company in desperate effort to save the company from bankruptcy. According to this deal, two companies would share risks and benefits of the oil projects at Caspian Sea coast that were owned by Shell and some smaller Far

Eastern oil projects that were owned by Royal Dutch. The cut of this deal was 60:40 in favor of Royal Dutch, the cut that remained throughout the 100 years history of the Group. Back then, many regarded this deal as a merger, however it was not thru. Both companies remained independent and continued that way until recently. So, definition that is more appropriate would be partnership or alliance. In the early 20th century, Group started aggressive expansion through acquisitions in Europe, Africa and the Americas, which continued also in interwar period, when Shell entered into chemicals production. All in all, after the second World War RDS became a global integrated oil and chemicals company, thought its assets have been confiscated twice during the wars. Following the war Shell