Shell oil scandal 'began in 1998'

THE Financial Services Authority, the City watchdog, has alleged that Shell's now infamous mis-statement of proven reserves dates back to 1998 - four years earlier than was previously thought.

Its investigation, published today, also found that the company ignored warnings as early as 2000 that estimates may be wrong.

The world's third-largest oil group admitted earlier this year it had overbooked oil and gas reserves by more than 4bn barrels, slashing its lucrative energy portfolio by 23% and stunning the City.

The mis-statement of reserves was previously thought to have begun in 2002. However, the FSA said Shell made false and misleading statements between 1998 and 2003. It failed to correct the estimates until earlier this year.

The watchdog said these factors made Shell's 'abuse of the market particularly serious'. It added that the company had cooperated fully with the probe.

The sensation cost three executives their jobs, including former chairman Sir Philip Watts, amid allegations the issue had been covered up in the boardroom for two years.

The FSA confirmed it had fined Shell £17m. Shell said in July it would pay the penalty 'without admitting or denying the FSA's findings or conclusions'.

Meanwhile, in America the US Securities & Exchange Commission also said it will fine Shell $120m (£67m).

Shell said it had improved controls 'to prevent any recurrence of these unfortunate events'. Jeroen van der Veer, chairman of Shell's committee of managing directors, said: 'The conclusion of the FSA's and SEC's investigations into Shell represents another significant step for Shell in putting the reserves issues behind us and continuing our efforts to regain and maintain the confidence and trust of our investors, partners, customers and employees.'

The news hit shares in the Anglo-Dutch group but they recovered slightly to end the day down 5p at 396 3/4p.