Shell is to make $15bn (£10bn) of spending cuts and has warned Chancellor George Osborne that North Sea operations will remain in the firing line unless he can offer tax cuts.
The chief executive, Ben van Beurden, said he had already put in place a restructuring programme selling off some North Sea fields but low oil prices meant more savings must be found.
At the same time western Europe’s largest oil company said it was “never going to be easy” to recreate the US fracking boom in Britain and admitted a shale drive in China had been disappointing.
On the North Sea, Van Beurden said: “We see falling production levels, rising cost levels, very high tax and ageing assets so it was a tough place and it just got tougher with the low oil prices ... There is a plan for the future of the North Sea ... [but] we need to take a significant hard look at the tax position.”
“The low oil price environment is giving us more [UK cost-cutting] opportunities, at first in the supply chain as activity levels run down ... [and] we will continue to take a look at costs and efficiencies,” he added.
Pressed on whether Shell could give guarantees that there would be no further redundancies in Aberdeen this summer, Van Buerden said: “There are no guarantees in life.”
Shell revealed 250 job cuts in Britain’s oil capital of Aberdeen at the start of August while BP has since axed 300. Chevron of the US and Statoil of Norway have also cut their UK staff.
The $15bn worth of spending cuts will fall over the next three years and the company said 40 projects worldwide could be hit as it tried to protect itself from the sharp fall in oil prices, down almost 60% since last summer.
Shell already sold off $15bn worth of fields and other assets last year and Van Beurden said it could be months or even years before Brent oil prices returned to the $90-$100 level that he felt were needed to support the level of investment necessary to meet longer-term oil and gas demand.
The energy group reported final-quarter profits almost doubled to $4.1bn, but that was largely because the equivalent 2013 figure was hit by all sorts of special charges and costs.
Full-year earnings were up 14% to $19bn. Shell shares were the biggest faller in the FTSE 100, with shares down more than 4% in early afternoon trading.
The Anglo-Dutch oil group said it was cancelling investment plans to build up its financial buffers amid widespread cost cutting and layoffs across the industry. Oil prices were trading at just below $49 a barrel on Monday, down from around $115 in June last year.
Shell, the first of the big oil groups to publish results for 2014, also increased its payouts to shareholders despite the plunge in the oil price but said dividend growth would be frozen.
“We slowed our [share] buyback programme at the end of 2014 to conserve cash, and near-term oil prices will dictate the buyback pace,” the company said.
Van Beurden said oil buyers and traders had overreacted in pushing down the price so far at a time when the margin between supply and demand remained very narrow at 1 or 2%. The Shell boss was confident that eventually a more normal oil price level would be established, saying fossil fuels would play a significant role in future despite the need for action to reduce carbon in the atmosphere in the hope of stemming global warming.
Meanwhile, the company, which is not currently looking for shale gas in Britain, said it was switching its Chinese exploration focus from onshore shale to offshore prospects in locations such as the Pearl River basin.
Shell believed China may yet be able to find the kind of commercial shale opportunities that had transformed the energy scene in the US but said it is going to be hard there and in Britain.
“I fully expect the Chinese will make it work, or make some of it work because they will get the cost down and find the regulatory framework but there is a message to anyone outside China, including the UK, that this is not an easy thing to do,” said Simon Henry, the Shell finance director.
“In North America we have a million wells or more. They drill 10,000 a year so that flow of new [geological] information on top of the existing base is what creates the knowledge of where to drill the next one and how to do it ... the UK has two wells in it and neither of them produce. We dont know the geology and that is the key. It’s about real estate. You get the right real estate you get a good project. Around that you need a good fiscal framework, you need capability, lots of rigs, people who can do the work, and infrastructure which the UK does not really have.”
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