Norsk falls foul of SEC over reserves

NORSK HYDRO has followed fellow energy giant Shell in falling foul of the US Securities and Exchange Commission's (SEC) clampdown on exploration groups overstating their oil and gas reserves.

The Norwegian group admitted today that, following 'a dialogue' with the SEC, it has reworked its accounting methodologies and downgraded its previously stated proven reserves by 6%.

Shell's 23% cut in reserves and three subsequent downgrades led to the ousting of senior executives, including chairman Sir Philip Watts, and stormy shareholder meetings' in London and The Hague yesterday.

A 30% reduction in the reserves booked by Norsk Hydro for its stake in the giant Ormen Lange field in the North Sea is at the heart of the company's downgrade.

That had oil analysts scratching their heads as BP, also a partner in Ormen Lange, today said it has marginally upgraded its total proven reserves in filings with the SEC and made no mention of any doubts over Ormen Lange.

Norsk Hydro said the downgrading would not affect profitability. All oil majors have been in long talks with the SEC over interpretation of what the US regulator classifies as proven reserves ahead of the filing of companies' obligatory '20-F' annual reports.