Shell unveils £19bn investment as oil prices drive 13% profit hike

Chief executive Peter Voser said the British/Dutch oil giant, which revealed output fell 3 per cent last year, will pump $30 billion (£19bn) into 60 new projects and drilling options in the coming 12 months. It is a hefty rise from capital spending of $24bn by the group last year.

Shell said it would also spend $6bn on its existing “heartland” fields in the North Sea and south-east Asia. Voser said the group was assuming a $50‑$90 dollar a barrel oil price for its projects compared with an average price of near $100 in its latest trading quarter to end‑December.

The company said it was targeting a 25 per cent rise in production by 2017-18 to four million barrels of oil equivalent per day (boepd), with the lifting of the moratorium on drilling in the Gulf of Mexico after BP’s Macondo well disaster providing one opportunity.

In the face of global warming, the chief executive said there were also commercial possibilities in energy efficiency and carbon capture storage. Apart from a 5 per cent rise in 2010, Shell’s production has fallen every year since 2002.

However, Voser, seeking to reassure the City on future financial returns after Shell’s fourth-quarter earnings came in below expectations, stressed: “I am looking for financial growth, not simply a game of chasing barrels.”

Shell said its investment would drive cashflow up 50 per cent and also signalled dividends would rise in 2012 for the first time since 2009.

It came as the oil giant, the biggest in Europe by market value and the largest dividend payer in the FTSE 100, posted a rise in Q4 profits to $6.5bn (£4.1bn) against $5.7bn a year earlier.

The result was down on the $7.2bn profit struck in the previous three months to September as the oil giant was hit later in the year by a squeeze on refining margins and lower US natural gas prices. Shell’s annual profits surged 54 per cent to $28.6bn from $18.6bn.

Both the Q4 and full-year dividends were held at $0.42 cents and $1.68 cents respectively, with the company saying it expected to pay a Q1 divi for 2012 of $0.43 cents – growth of 2 per cent on Q1 2011.

Voser said it was Shell’s “improving financial position” that allowed an increase to both dividends and investment, adding that the return of rising shareholder returns was meant to show the group’s confidence that “there is more to come from Shell”.

He reaffirmed Shell’s commitment to North Sea production, but gave a veiled warning to Chancellor George Osborne ahead of next month’s budget about any further tax hikes on energy activities in the region following a previous rise by the coalition government.

“As soon as you get tax changes in that reduce your opportunities to invest, because profitability is no longer there, investment [tends to] come down,” Voser said.

Shell deflected questions as to whether the Scottish independence debate made decisions on North Sea investment more difficult. “I think that’s not a question for us, really”, Simon Henry, chief financial officer, told a City of London news conference.

Shell’s shares closed down 3.5p at 2,265p.