Royal Dutch Shell has agreed to pay $80 million (£39.8 million) to settle an American class action lawsuit related to a 2004 downgrade of the oil giant's reserves.

Shell said that it had reached an agreement in principle with two pension funds, the Pennsylvania State Employees' Retirement System and the Pennsylvania Public School Employees' Retirement System. They had begun litigation after accusations that Shell had misled investors for years by overstating its reserves of oil and gas.

Shell added that the agreement would serve as a model for other US claims from investors who had bought shares between April 1999 and March 2004.

The agreement, which still needs to be approved by the US District Court of New Jersey, represents the same payout per share as agreed with another Anglo-Dutch group of investors last year, worth $353 million.

The company said: “The proposed US and Dutch settlements, if approved by the courts, would put an end to all pending litigation arising out of the 2004 reserves recategorisation.”

About 80 per cent of the group's shareholders are based in the UK and Europe, with the remainder in the US. Shell has set aside $500 million in provisions for the reserves claims.

The episode in 2004 triggered a string of senior departures from the oil giant, including the then chairman Sir Philip Watts. It also led to a period of soul-searching at the company that ultimately forced it to end its unusual dual-listed structure between the UK and the Netherlands.

Despite placing a big focus on its exploration and production operation since 2004, Shell has still struggled to replace its existing reserves of oil and gas.

The Anglo-Dutch oil giant suffered a 6 per cent slump in daily oil production last year to 3.3 million barrels, down from 3.5 million in 2006.

Further details of Shell's reserves base will be published on March 17 at a strategy briefing.

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