Don't blame the stripey jumper

26 January 2006

Repsol replaces only a fifth of its reserves. Boosting them will require expensive M&A or huge investment. Neither bodes well for returns. The Spanish oil firm has cut its reserves by 25%; Shell cut by "only" 20%. And the Spanish oil firm is in a worse strategic position too.

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Repsol, Spain's biggest oil company, will write off about 25% of its gas and oil reserves because of higher taxes in Bolivia and deteriorating production from deposits in Argentina.

Repsol eliminated of 1.3bn barrels of proven oil equivalent (or "boe"), and its audit committee hired independent advisers to help review circumstances leading to the writedown, chairman Antonio Brufau said.

Repsol said 659m boe were eliminated from Bolivia, 509m barrels in Argentina, and 86m barrels from deposits in other nations. Repsol had total reserves of 4.9bn barrels at the end of 2004.

Brufau began investigating reserves after taking over from former Chairman Alfonso Cortina in October 2004. Repsol estimated the cost for revisions at less than E50m.

Repsol is trying to offset lower output in Latin America by investing outside the region, which accounts for about twothirds of Repsol's production. The company wants to get 90% of its output growth by 2009 from Libya, Algeria, Trinidad and Tobago and Venezuela.

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