Shell begins dismantling its 97-year-old corporate structure

Royal Dutch/Shell yesterday embarked on the historic dismantling of its 97-year-old corporate structure

Royal Dutch/Shell yesterday embarked on the historic dismantling of its 97-year-old corporate structure. But the news was overshadowed by a warning that it may have overstated its proved oil reserves by even more than previously admitted.

The decision by the Anglo-Dutch oil group to recommend a full merger of its Dutch and British holding companies goes far beyond the demands of leading investors, who had been pushing for a combination of the companies' two boards.

Investors had blamed the company's Byzantine management structure on the failure to identify and stop the reserves booking scandal, which led to the departure of three of the company's top executives.

Mr Jeroen van der Veer, appointed yesterday as the first chief executive of the combined company, said the new structure would offer greater accountability and guarantees against auditing problems, as well as being "more performance-oriented, more competitive and less complex".

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One person close to the deal said the merger was driven primarily by the need to improve Shell's "lamentable" decision-making processes.

Another priority was to bring the company in line with industry peers such as ExxonMobil and BP, who have left Shell lagging in the race to increase production and replace oil reserves.

Others close to the deal said the simplification of its structure would provide Shell with greater access to the capital markets and allow it to pursue all-paper takeovers. Shell missed out on the previous round of industry mergers in the 1990s.

Separately yesterday, Mr Malcolm Brinded, head of exploration and production at Shell, said the group could be forced to unbook a further 900 million of its 14.35 billion barrels of oil reserves, and left open the prospect of further revisions.

Mr Brinded said yesterday: "It is clearly disappointing to be addressing a subject that we had put behind us. People may ask why we have made changes to figures that we said were correct before."

Investors welcomed the merger, but analysts warned it did nothing to address Shell's basic problem in finding oil.