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Shell proved hydrocarbon reserves recategorised
Posted: 09 January 2004
Proved reserve recategorisation following internal review:
No material effect on financial statements
The Royal Dutch/Shell Group of Companies (‘Shell’) announced
that, following internal reviews, some proved hydrocarbon reserves
will be recategorised.
The total non recurring recategorisation, relative to the proved
reserves as stated at December 31st 2002, represents 3.9 billion
barrels of oil equivalent (‘boe’) of proved reserves,
or 20% of proved reserves at that date. Over 90% of the total change
is a reduction in the proved undeveloped category; the balance is
a reduction in the proved developed category.
There is no material effect on financial statements for any year
up to and including 2003. The recategorisation of proved reserves
does not materially change the estimated total volume of hydrocarbons
in place, nor the volumes that are expected ultimately to be recovered.
It is anticipated that most of these reserves will be re-booked
in the proved category over time as field developments mature.
Of the recategorisation two thirds (2.7 billion barrels) relates
to crude oil and natural gas liquids, and one third (1.2 billion
boe or 7.2 trillion standard cubic feet ) to natural gas.
The recategorisation itself is not expected to have a material impact
on hydrocarbon production in the near term. As advised in March
2003 and October 2003, the production profile for 2003 – 2005
is expected to be broadly flat. As of December 31st 2002, proved
reserves were equivalent to 13.3 years of production.
The FAS69 standardised measure of discounted future cashflows associated
with the proved reserves will be impacted. The estimated 10 per
cent reduction in the standardised measure is significantly less
than the 20 per cent change to proved reserves, as the majority
of the recategorisation relates to proved undeveloped reserves and
to relatively low margin producing areas.
Further analysis is ongoing to determine the extent to which the
recategorisation will impact on prior year reported proved reserves
and the results will be disclosed.
The figures quoted above do not include any amounts that will be
added to reserves as the result of normal operations in 2003. On
a preliminary basis, ignoring the effect of the adjustment noted
in this release, the reserve replacement ratio for 2003 is expected
to be in the range 70-90 per cent, representing the net addition
of between 1.0 and 1.3 billion boe. The final figures for 2003 reserve
replacement will be disclosed on February 5th 2004.
Several factors identified by Shell’s own reviews led to the
recategorisation. During Q4 2003, a number of in depth reserve studies
were completed, which prompted a broad review of its previously
booked reserves against current proved reserves standards.
Reserves affected were mainly booked in the period 1996 to 2002.
A significant proportion of the recategorisation relates to the
current status of project maturity. The recategorisation brings
the global reserve base up to a common standard of definition, consistent
with the globalisation of processes within the new Exploration &
Production business model.
A number of countries are affected by the change, with the largest
impact in Nigeria and Australia. The majority of the overall recategorisation
will be reported under ‘Other Eastern Hemisphere’.
For more information see http://www.shell.com
Posted by Richard Price,
Editor Pipeline Magazine
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