Shell Comes Out Fighting

International oil giant Shell has quickly dismissed suggestions that its executives in Nigeria were encouraged to inflate reported oil reserves by the prospect of bonuses.

The claims were made over the weekend, pouring fuel on the controversy engulfing the company over how it accounted for its reserves, which cost chairman Sir Philip Watts and head of exploration Walter van de Vijver their jobs last week.

A spokesman dismissed the Nigeria claims and said: "Group managing directors have a range of performance measures, and reserves account for about 2 percent of that measure.

"Sir Philip has already said reserves are not a great lever for bonuses."

The Nigerian government offered tax breaks to companies searching for or declaring reserves between 1991 and 2000 under a scheme called the Reserve Addition Bonus Scheme.

"It was an incentive for foreign joint ventures based not only on volumes but also the activity used in finding those volumes," the spokesman said. "We have been in discussions with the Nigerian government and we were doing this well before the recategorisation."

No specific details about the discussions were provided, however, although Shell said that under Nigerian regulations oil companies must report other categories of reserves as well as those classified as proven.

All reported reserves are eligible for bonuses under the Nigerian scheme, which Shell argues leaves it with no motive for upgrading unproven reserves.