North Sea oil: Shell abandons plans to cut oil production by 1-2% and announces bumper new shareholder pay-outs

The oil major said it planned to keep the amount of oil that it extracts from wells around the world at the same level as today.

Production from oil and gas reservoirs naturally declines by around 5 per cent every year, so maintaining production at existing levels will require major investment from the oil giant.

Two years ago Shell said the $8 billion dollars (£6.3bn) it planned to invest was “well below” the investment required to offset this decline.

Shell argued it had already met the 2030 oil reduction target, seeing its production drop from 1.9 million barrels of oil equivalent a day in 2019 to 1.5 million in 2022.

The firm has reduced the amount of oil it produces by selling off oil fields to other companies, who continue to extract fossil fuels from them.

For instance, the company offloaded a little under 0.2 million barrels of daily production when it sold its sites in the US Permian basin to ConocoPhillips in 2021 for $9.5bn (£7.5 bn).

“Our target of a reduction in oil production by 2030 has not changed – we’ve just met it eight years early,” the business said. Shell said that it intends to grow its gas business.

It also announced a major new incentive for shareholders, as it said it would pay them at least £5bn (£4bn) by buying back their shares in the second half of this year.

New chief executive Wael Sawan, who is trying to please investors who have seen Shell’s shares trade lower than some of its rivals, also said the dividend would rise by 15 per cent.

Shell said that it would reduce capital spending by between $22-25bn (£17-20bn) in 2024 and 2025.

It will also slash its annual operating cost by between $2-3bn (£1.59bn and £2.3bn) by the end of 2025.

Mr Sawan said: “We are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future.

“Performance, discipline, and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions, while enabling the energy transition.”

He added: “We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system.

“We will invest in the models that work – those with the highest returns that play to our strengths.”

Work on the proposed Cambo development off the west coast of Shetland was paused in December last year after Shell decided to withdraw from the project, concluding the economic case for investment was “not strong enough”.

Shell is hoping to find a buyer for its stake in a controversial oilfield, which has become a key focus for the UK’s anti-fossil fuel campaigners. In November last year, former first minister Nicola Sturgeon said the Cambo project should not go ahead.