Gorgon on track as Shell reviews accounting practices

The decision by Royal Dutch Shell to write down its Gorgon reserves by 20% has painted a much gloomier picture of the controversial project than it deserves, with over zealous accounting the real force behind the multi-national company's about-face.
Gorgon on track as Shell reviews accounting practices Gorgon on track as Shell reviews accounting practices Gorgon on track as Shell reviews accounting practices Gorgon on track as Shell reviews accounting practices Gorgon on track as Shell reviews accounting practices

Shell was the only partner (29% interest) involved in developing the Gorgon project to book its share of reserves, having done so as far back as 1997, with the Joint Venture still a year away from final approval for development.

Most major exploration and production companies wait until they confirm sales contracts before booking reserves.

The move by Shell has been attributed to a crackdown by US regulators who have been much more diligent in their duties since the collapse of Enron.

After the fall of the energy giant the US Securities and Exchange Commission has been demanding that exploration and production companies book their oil and gas reserves in line with SEC requirements.

Shell's approach to the Gorgon assets has reportedly not met those criteria or those of the Society of Petroleum Engineers/World Petroleum Congress and yesterday's action was a bold bid to move back within those guidelines.

Back in Australia the WA State Government and ChevronTexaco, the project manager with a 57% stake, have thrown their full weight behind the $11 billion Gorgon gas project to head off concerns raised after Shell's writedown.

State Development Minister Clive Brown said Shell's decision should have little impact on Gorgon, or the expected flowthrough benefits for WA.

The downgrades have also increased pressure on Shell chairman Sir Philip Watts to resign. Sir Philip headed Shell's exploration arm from 1997 to 2001 and UK media reports say he was part of a team involved in signing-off the original reserves estimates.

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