Oil giant Shell learned yesterday that it would not face criminal charges from federal authorities in the United States over the overstatement of its oil and gas reserves.

A federal prosecutor said regulatory fines imposed on Shell and its willingness to co-operate with the investigation meant a prosecution would not be in the public interest.

Shell stunned the market in January last year when it disclosed its reserves were 20 per cent lower than previously thought, causing a serious slump in its shares.

It subsequently cut its estimates four more times in a crisis that claimed the scalps of chairman Sir Philip Watts, exploration and production boss Walter van de Vijver, and finance chief Judy Boynton.

The fiasco also led Shell to propose ending its twinboard structure in the biggest shake-up in its history - a move which won the backing of UK investors at the annual meeting of the oil giant on Tuesday.

Shell paid $120 million (£65.7 million) in a settlement with the Securities and Exchange Commission in the US last year and was also hit with a £17 million fine by the Financial Services Authority - the heaviest penalty ever imposed by the UK regulator.

In a statement overnight, US attorney David Kelley announced that he had concluded " a criminal prosecution of Shell would not serve the public interest at this time".

Mr Kelley credited Shell with co-operating with the probe launched last year into the overbooking of its proven oil and natural gas reserves by 4.47 billion barrels from 1997 to 2002.

The prosecutor also cited the fine by the SEC for violations of reporting, record-keeping and antitrust rules.

As part of its settlement with the SEC, Shell agreed to spend $5 million (£2.7 million) on developing a comprehensive internal compliance programme.

Chief executive Jeroen van der Veer said: "The conclusion of this investigation is a most important step toward putting the matter of the reserves recategorisations behind us."

Shell has been told by Dutch securities regulator AFM that its investigation does not give rise to any further action at this stage.

But events that led to the reserves are still being investigated by the Euronext Amsterdam stock exchange and Shell is also facing several class action lawsuits in the US.

It is trying to have some claims dismissed in the US courts and is in talks to settle others.