'Outdated' rules could help Shell

THE Texan company reviewing the swathe of oil and gas reserves booked by Shell will show support for the beleaguered group tomorrow by questioning Wall Street's insistence on using guidelines last updated a quarter of a century ago.

Ron Harrell, chief executive of the Houston-based engineers Ryder Scott, believes there are signs of a growing gulf between technology and the rules set by the US Securities and Exchange Commission.

He will also warn that post-Enron and the introduction of the Sarbanes-Oxley Act in the US to prevent corporate fraud, the SEC is only likely to up the pressure on the world's largest oil companies.

SEC chairman William Donaldson has already told engineers like Ryder Scott they may be subject to penalties if their work is not 'up to standard', causing Harrell to call for an international certification scheme for geologists. His speech will open a debate hosted by the Society of Petroleum Engineers. The Shell debacle has made it the hottest ticket in town. One insider said: 'People are trying by hook or by crook to get into this.'

Privately owned Ryder Scott is one of a handful of engineering consultants used by the world's oil and gas explorers to confirm discoveries and certify their size and shape in line with SEC criteria. It stands to make millions of dollars from its first major contract with Shell. It is believed to have sent in 30 staff since its appointment in January and is poring over details on each of its major fields.

Its input led Shell to make its second reserves downgrade since the start of the year last week. One industry expert said: 'Getting Ryder Scott in says Shell doesn't even trust their own technical people.'

Harrell's comments may fuel the backlash simmering in the City over the SEC's rules, which many feel do not take account of the huge advances in seismic and pressure data now taken on oil and gas finds. The regulator still calls for flow tests on wells for proven reserves, often impractical and vastly expensive for deepwater fields likely to be the cornerstone of future exploration as the supermajors.

Deutsche Bank this week slammed the SEC for sticking by 'outdated' standards, warning their over-conservative policies could harm companies' abilities to raise cash in future.