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Last Updated: Sunday, 14 November, 2004, 14:30 GMT
Oil on troubled waters
On Sunday, 14 November, 2004, Sir David interviewed Chief Executive of Shell, Jeroen Van Der Veer.

Please note "BBC Breakfast with Frost" must be credited if any part of this transcript is used.

Chief Executive of Shell, Jeroen Van Der Veer.
'There are still huge reserves in the Middle East'

DAVID FROST: Now after a turbulent period in its business fortunes, the oil company Shell recently announced a major shake-up of its corporate structure, and has signalled its determination to overtake rivals like BP and maybe even EXXON as well, for the top spot.

One that it's occupied in the past in the global oil market. By developing new sources of oil in Russia and even Iraq, Shell hopes to shake off the bad press it received earlier this year when it emerged that it exaggerated, hugely exaggerated, the extent of its oil reserves by 20%.

I am joined now by the Chief Executive of Shell, Jeroen, that's the right pronounciation isn't it, Van Der Veer. Good morning to you. How are you.

JEROEN VAN DER VEER: Thank you very much David. I am pleased to be here.

DAVID FROST: First of all the big scandal as it were, earlier this year, which led to your having to take over the reins as it were. There are still three possible actions against Shell being considered, aren't there?

JEROEN VAN DER VEER: Yes, we have five authorities around the world who were investigating us. Two are settled, and three are, three to go.

DAVID FROST: And which of the three to go?

JEROEN VAN DER VEER: It's the Department of Justice in the USA, there's Euro next, that's the equivalent of the stock exchange here in London, then on the continent and the AFL a kind of financial authorities in the Netherlands.

DAVID FROST: Which do you think in terms of criminal action or whatever, which is the most serious of those three.

JEROEN VAN DER VEER: David you can't say that.

DAVID FROST: They might be listening. The other two might be listening.

JEROEN VAN DER VEER: What we do is we really try to get this whole crisis behind us so what we do we provide maximum co-operation with the authorities and what does that mean is that if they ask for information you try to give it as quick as possible, as good as possible, maximum insight.

And then you hope that we can round off all those investigations as early as possible.

DAVID FROST: And how does a thing like this happen though. You've got this 20% overstatement of the reserves. I mean, and in fact your predecessor apparently warned by various whistle-blowers in advance about it, and then forgetting about them and saying he'd only just heard.

But I mean, how does that happen. It's mega in its size isn't it?

JEROEN VAN DER VEER: Yes, well what happened is that we have a system where we basically counted, so to say, our reserves for our own production purposes. And we did not keep our eye how we should report that to the American authorities.

And it was an important mismatch so to say, between our internal system and how we reported the data to the Security and Exchange Commission in the US. But it is important to realise the stuff that is not our major concern is not lost.

DAVID FROST: And what about the situation now. I'm sure everybody watching us at this moment is thinking that you are the man that can answer this question. How do you see the oil barrel price going in the next 12 months, and what effect will that have in the forecourts of the garages of Britain?

JEROEN VAN DER VEER: What is interesting is if the oil price is high, for instance when it was nearly $50 per barrel, many people think then it will stay high. Six years ago when it was $10 dollars per barrel many people think it stays $10.

That are probably the wrong predictions, because if you look back oil price goes up and down all the time. So to say tough to forecast, but I was just looking yesterday at price and stock data of the industry. At this moment there are enough stocks.

There's no real alarm if you compare to last year stock levels in the world are pretty normal. So there's probably the oil price went up due to a combination of factors which not necessarily repeat itself for the coming year. For instance there was a huge demand increase in China.

Even in the US. But if oil prices go up people will use less, it may take a bit of time. Secondly is the high oil prices takes us all time, you get more capacity. So in a year's time you may have whilst we have now, the present production capacity is very close to the actual demand.

That in a year's time you may have more capacity and demands under the price and you get a bit of slack there and that, if that happens, one can expect that prices get to, let's say, different levels as we are seeing over the past months.

DAVID FROST: But your colleague or rival or whatever, John Brown, was saying too that, what percentage in fact of the oil price, or of the petrol price, is in fact tax, around the world and particularly here?

JEROEN VAN DER VEER: So in most European countries and I see you part of Europe. Is that there's about say 70% tax.


JEROEN VAN DER VEER: 70%, 30% has to do this oil refining and marketing.

DAVID FROST: And what about in terms of the future. Has all the oil in the world, people worry and that's good to know from you there's no dangers at the moment but, people worry about the plentitude of oil and so on.

Has all the oil in the world been discovered, or may we find a lot more or not?

JEROEN VAN DER VEER: The problem for the oil industry and the gas is not either enough reserves. Maybe very many many many decades from here. But then the coming decades it is not about either enough reserves.

One can develop what we call unconventionals, unconventionals. Think about oil in Canada, you can drill in deeper water, there are still huge reserves in the Middle East and we will discover more gas.

The bottle neck will be how fast the industry or state-owned companies develop production capacity to bring it to the markets. And in itself that will require huge investment in the coming decades, probably more than we expected 10 years ago.

DAVID FROST: I see, well that's a very interesting gaze into the future. Thank you very much Jeroen for being here today. We appreciate it.

NB: this transcript was typed from a recording and not copied from an original script.

Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.

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