In the wake of its earlier write down of oil and gas reserves and resulting management purge, Royal Dutch/Shell Group is the subject of NY Times and Wall Street Journal ($) articles today regarding the management failures that led to the overstatement of reserves. The WSJ article is the better of the two articles, and makes the following observation:

. . .the big forces that helped humble Shell are already clear. The oil giant has been plagued by what was once a source of strength: a quirky, loose corporate structure bestriding its twin bases in England and the Netherlands. And it erred in overrelying for growth on its traditional prowess for finding oil, as new discoveries have grown harder to eke out. The revision has also painted a starkly different picture of the company’s recent performance, showing Shell lagging behind competitors in key performance measures instead of just keeping up. The company has replaced reserves at a much lower rate than originally thought, and its costs are significantly higher.

And somewhat more ominously for Shell, the WSJ observes:

A number of mysteries remain unanswered. How did Shell misjudge its reserve so badly? Why didn’t anybody catch the mistakes before now? Why didn’t Sir Philip disclose them sooner? Did Shell actively try to hide the problem? The company’s current top executives — including Shell’s chief financial officer and the man who replaced Sir Philip as chairman — are under pressure to disclose what they knew about the reserve problems and when. Shell’s board signaled in a statement Tuesday that it is standing by them.
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The SEC and Shell’s internal investigators are looking into whether the company’s bonus system provided financial incentives to employees to overstate reserves, according to people familiar with both probes. Shell has acknowledged shortfalls in its reserve oversight and auditing processes, and has restructured its auditing process.

Meanwhile, in this related article, the WSJ reports on the absurdly understaffed nature of the Securities and Exchange Commission‘s staff that reviews the oil and natural-gas reserves that publicly-owned oil companies claim in their regulatory filings. The entire job is left to just two staff petroleum engineers.