Shell cut reserves 'over Nigeria'

Shell's chairman is due to explain reasons for the cut

Nigeria says it was a reassessment of its oil fields that led Shell to cut proven reserves by 20% last month, the Financial Times reported.

The country's officials maintain Nigeria accounted for a third of the 3.9bn barrel cut, the newspaper says.

The company reportedly expects to reinstate at least half of the reserves over the next five years.

Shell's chairman is set to explain the reasons for the surprise cut to shareholders on Thursday.

Row over funding

The company had allegedly prematurely booked some of Nigeria's oil and gas fields as ready for development between 1996 and 2002.

The company's concern over costly infrastructure investments needed to deal with the natural gas found in its oil fields slowed development, the paper quotes a Nigerian government oil official as saying.

Burning off natural gas from oil fields is to be outlawed in Nigeria from 2010 under environmental laws.

But a senior Shell executive told the newspaper that the primary constraint was the amount of investment the Nigerian government was prepared to make in the project.

"To put in an integrated gas and oil development is more expensive than a simple oil development," said Chris Finlayson, chairman of Shell Petroleum Development Company of Nigeria.

"In essentially a capital-constrained environment, with a limit on the funding going into the industry, clearly that does constrain how much you can do," he said.

Shell said when it cut its proven reserves it did not expect the reassessment to have any impact on its financial results, as 90% of the reserves involved remained undeveloped.

Shell said it was moving 3.9bn barrels off its proven reserves list into another category, known as "scope for recovery", but remained confident it would be able to return a big chunk to its proven pumpable holdings after further commercial assessment.