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Shell urges SEC to ease rules

Royal Dutch Shell, Europe's largest oil company, is asking US regulators to ease rules to allow the company to book oil and gas reserves from unconventional sources such as its Canadian tar sands operations.

Under US Securities and Exchange Commission rules, oil companies are only allowed to book reserves from oil and gas finds that are considered readily available or from "conventional" sources. These do not include tar sands, also known as oil sands, which would normally be classified as a mining operation.

The company is expected to announce a set of figures showing barely positive reserve growth when it lists its reserve replacement guidelines next month, and is keen to boost its figures by adding in unconventional sources of oil and gas.

Shell said on Friday that it had sent a letter to the SEC in response to an SEC-led consultation asking for proposals to revise reserve disclosure requirements.

Despite Shell's record profits for 2007, shareholders remain concerned whether the company's long-term strategy of turning to technologically advanced and unconventional projects such as tar sands and gas-to-liquids projects, will pay off.

Shell's shareholders have become sensitive to its reserve replacement guidelines following a reserves booking scandal that rocked it in 2004. The scandal prompted the sacking of three senior executives, regulatory probes and lawsuits, as well as $150m in fines.

Shell's reserves figures are set to suffer because of the effects of stripping out potential reserves from its Sakhalin-2 joint venture, in which it was forced into signing away a majority stake to Russia's Gazprom.

Many oil companies are struggling to book strong reserve replacement rates and are keen to revise SEC rules. Earlier this year, Shell said that it had found about 1bn barrels of oil equivalent to add to its resource base last year, although that figure is different from the definition of proved reserves accepted by the SEC.

Separately, Shell is set to complete the sale of its share in two offshore oil licences in Nigeria to a Nigerian company, which has seen off a rival bid by CNOOC, China's biggest offshore producer.

Oando's bid, if successful, would make it the first Nigerian company to secure producing assets from a multinational operating in Africa's biggest oil producing country.

Sources close to the deal said that Oando had secured a $200m facility from Merrill Lynch to help it finance the deal, and was looking to find a further $400m of non-recourse financing to be secured by the oil-producing assets themselves.

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