Royal Dutch Shell suspends Arctic drilling plans

Royal Dutch Shell is to suspend its controversial drilling in Arctic waters off Alaska as part of a multibillion-dollar scaling back of spending on new projects under Ben van Beurden, chief executive.

The Anglo-Dutch oil major said on Thursday that a recent US court appeals decision challenging the granting of licences in the Chukchi Sea off northwest Alaska had prompted it to suspend plans for further exploration in the area.

"This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014," said Mr van Beurden.

Shell's retreat on plans to resume Arctic drilling this summer came as Mr van Beurden, who took over as chief executive this month, set out plans for sharp cuts in the company's investment spending this year and further disposals to boost cash flow.

The company said capital spending that totalled $46bn last year, including $8bn of acquisitions, would fall by as much as $9bn to $37bn this year. Mr van Beurden said the belt-tightening would be marked by "hard choices on new projects, reduced growth investment and more asset sales".

Some operations could be restructured, he added, as he conceded that "Shell had lost operational focus in some areas".

His remarks came two weeks after Shell, Europe's biggest oil group by market value, issued its first profit warning in 10 years.

On Thursday Shell confirmed that quarterly earnings had fallen to £2.9bn for the fourth quarter of 2013, $1bn less than previous consensus estimates and down by nearly half on the $5.6bn on the same period the previous year.

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The company cited a continued squeeze in refining margins, security problems in Nigeria and higher exploration costs as key causes for the drop in profits.

Shell is reviewing its upstream business in the Americas and could sell or write down the value of assets, while excess refining capacity could lead to the closure or sale of plants.

"We will moderate growth ambitions and improve cash flows and returns," said Mr van Beurden who denied suggests of "kitchen sinking" or "clearing the decks".

"If Peter Voser [Shell's former chief executive] was standing here today, you would have had exactly the same results and statements," he said.

END ADDED QUOTE<>On Wednesday Shell announced it had agreed to sell a stake in one of its Brazilian offshore assets to Qatar's state-owned oil and gas company for $1bn. It had also announced this month the sale of a stake in the Wheatstone LNG project in Australia to its Kuwaiti partners for $1.1bn and is considering the sale of an interest in a US pipeline project as part of a disposal programme expected to raise $15bn over the next two years.

In spite of the slide in earnings, Shell said it expected to declare a first quarter dividend of $0.47, compared with $0.45 declared for the final quarter of last year.

Shares in Shell rose by nearly 1.8 per cent to £21.48 on Thursday, leaving them down 6 per cent over the past 12 months.

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