The Royal Dutch/Shell Group's oil production in Oman has been declining for years, belying the company's optimistic reports and raising doubts about a vital question in the Middle East: whether new technology can extend the life of huge but mature oil fields.
Internal company documents and technical papers show that the Yibal field, Oman's largest, began to decline rapidly in 1997. Yet Sir Philip Watts, Shell's former chairman, said in an upbeat public report in 2000 that "major advances in drilling" were enabling the company "to extract more from such mature fields." The internal Shell documents suggest that the figure for proven oil reserves in Oman was mistakenly increased in 2000, resulting in a 40 percent overstatement.
The company's falling production and reduced reserves in Oman are part of a broader problem facing Shell, the British-Dutch oil giant that earlier this year lowered its estimate of worldwide reserves, a crucial financial indicator, by 20 percent, or 3.9 billion barrels.
Documents show that senior executives were told the calculations of reserves were too high in 2002, at least two years before the company downgraded its estimate this January.
While Oman represents a small part of Shell's reserves, oil industry experts say the company's experience there highlights broader questions about the future role of Western oil companies and their technology in the Persian Gulf, which has most of the world's oil reserves.
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