Oil major Royal Dutch Shell on Thursday outlined plans to scale back spending on North American production as part of its first big shake-up since new Chief Executive Ben Van Beurden took over.

Shell plans to slash 2014 Americas production spending by a fifth versus 2013 on in areas such as shale gas, while redirecting onshore investment to the lowest cost gas acreage.

Van Beurden, who replaced Peter Voser, told journalists on a media call that Shell had gone into North American shale "in a big way" because it was a major opportunity for the oil and gas industry.

But he added: "Natural gas prices in North America are looking different now to what they were at the time and we're facing a new reality."

Shell is following rivals such as BP in reviewing its operations in North American shale as oil majors have struggled to profit from the boom in shale oil and natural gas.

Shell, which is already selling more than 700,000 acres of US shale assets, said it may make more divestments and may incur more impairments.

The group, which outlined major spending cuts and the suspension of its controversial Arctic drilling programme at the end of January, said it needed to get "a tighter grip on performance management" in a statement ahead of a strategy day.

Shell said it planned to re-organise its business into about 150 performance units, which it said would increase accountability, allow the group to target investment more productively and direct its efforts to areas where improvement was most needed.

Van Beurden said: "2014 will be a year when we change emphasis. We need to further improve on capital efficiency."

It plans to maintain core businesses like oil & gas production, which is producing high returns and strong cash flow, and refining, although that business is facing challenges in oil products.

The company also hopes to develop growth businesses such as deep-water and integrated gas and to identify longer-term opportunities including Nigeria, Iraq, Kazakhstan and global resources plays, where returns in 2013 faced problems such as losses in North America and the security situation in Nigeria.

The firm also proposes to break up its downstream business into distinctive areas to help it identify and off-load under-performing operations. Downstream includes strong businesses such as chemicals, lubricants and bio-fuels, but weaker and more volatile refining and fuel marketing activities.

Shell has announced plans to off-load $15bn of assets in 2014/15 and has done some $4.5bn of that so far. It has announced exits from Australia and Italy refining, Wheatstone LNG in Australia and US gas-to-liquids.

Responding to a suggestion that the divestment target was under-ambitious, Van Beurden said the level of sell-offs in 2013 had been quite low and Shell was bringing it back to more normal levels.

"We think that should be about $15bn, so let's see where we get to," he said.

"It's about continuing to prune the portfolio in areas where we don't see the resilience or attraction any more."

Van Beurden added that the company was investing in new upstream schemes in areas like the Gulf of Mexico and Malaysia.

He said Shell had not so far experienced any security problems as a result of the crisis in the Ukraine but was monitoring the situation closely.

Van Beurden added: "We must improve profitability in several
areas. We are taking stock of our investment opportunities and operating
positions. This approach is driving hard choices on today's asset base, new
opportunities, and disposal plans."

Shell expects dividend growth to be some 4% for the first quarter of 2014.

Shares fell 5.5p or 0.25% to 2,171p at 11:29 in London.

PW

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