Shell has fuelled further concerns over its oil stocks by slicing 10 per cent from its reserves and admitting that it replaced in finds as little as one-sixth of the hydrocarbons it extracted last year.

The oil giant announced a 38 per cent rise in profits for 2004, to £9.32 billion ($17.6bn), a record for any British company.

In the October-to-December period, when oil prices peaked, profits were more than three times those achieved for the same quarter last year, at $5.12 billion.

However, while the figures beat analysts’ forecasts, Shell also stunned the City by admitting that the completion of an audit of its reserves had found that 1.4 billion barrels in oil stocks has been wrongly classified as proven.

The revision was the fourth since January last year, when Shell revealed reserves misaccounting, an admission which prompted a plunge in its share price, the ousting of its chairman and head of production, fines by American and British financial regulators and a corporate governance shake-up which is ending the group’s Anglo-Dutch splits.

"2004 was a year of extremes, with the reserves recategorisation on one hand and record net income and cash generation on the other," Jeroen van der Veer, the group chief executive, said.

This morning’s statement also revealed that the company replaced in discoveries between 15 and 25 per cent of the oil it extracted last year, once business sell-offs were accounted for. Shell has a target of replacing in reserves at least as much oil as it brings to the market.

Today’s rejig has left the company with proved oil reserves sufficient for less than ten years of production at last year’s rate of 3.8 million barrels a day, compared with an industry average of nearer 15 years.

The shortfall prompted Numis analysts to question Shell's long-term growth prospects.

"With Shell’s reserves/production ratio at a low level, it gives no confidence that Shell can ever sustain long-term exploration and production volume growth,” the broker said.

Shell shares stood 11.5p lower at 468.5p in afternoon trade.

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