Oil companies must be forced to report more fully and transparently about their oil and gas reserves within annual reports and financial statements, according to Big Four firm Deloitte.
The accounting firm has urged the oil and gas industry to improve the information available to markets and restore investor confidence in reserves reporting.
Last year, oil giant Royal Dutch/Shell shocked the global corporate and investment communities when it revealed that it had overstated its oil reserves by billions of barrels.
The scandal led to the departure of many of its top executives, including CFO Judy Boynton, and a restructuring of its board.
Current reserve disclosures and definitions, on which many investment decisions are based, commonly follow US Securities and Exchange Commission (SEC) rules introduced in 1978 focusing on ‘proved’ reserves.
However, petroleum engineers globally have since significantly updated the structure and definitions for categorising reserves.
Peter Newman, managing partner of Deloitte’s global oil & gas group, said: ‘Regulators should work together globally and adopt the definitions and categorisation structures already endorsed by the petroleum experts and widely used within the industry today.
‘Confidence has waned in this area following the restatements over the last year of reserves previously reported and focusing only on “proved” reserves information is limiting and prone to misinterpretation.’