THE HAGUE, March 13 (Xinhua) -- Royal Dutch Shell will shrink its portfolio and costs in upstream in the United States, with 2014 spending to be reduced by 20 percent compared to 2013, was announced by the oil and gas giant on Thursday.
According to Shell the profitability of the upstream business in America has been impacted by losses in resources plays such as shales. In addition, Shell declared to redirect onshore investment to the lowest cost gas acreage and into on-going exploration in liquids-rich shales. At the same time, profitable growth should continue in deep-water and heavy oil, Shell stated.
The other area that needs improvement, according to Shell are the downstream results, including strong performance from businesses such as chemicals, lubricants and biofuels, but weaker and more volatile delivery from refining and fuels marketing.
Shell presented the annual report for 2013 on Thursday. The total earnings in 2013 were 16.88 billion U.S. dollars, compared to 27.42 billion in 2012 and 28.74 billion in 2011. The earnings on a current cost of supplies basis attributable to shareholders were 16.75 billion U.S. dollars in 2013, compared to 27.16 billion (2012) and 28.53 billion (2011). The total net income was 16.53 billion U.S. dollars, compared to 26.96 billion (2012) and 31.09 billion (2011).
Shell stated the ambition to secure growth and at the same time to increase divestments. This was reflected in a 35 billion U.S. dollar organic investment program for 2014 and 15 billion U.S. dollar divestment targets for 2014-15. Asset sales announced so far in 2014 total around 4.5 billion U.S. dollars.
Commenting on the financial position of the company, Shell's CEO Ben van Beurden said: "We've delivered industry-leading cash flow growth in recent years, and we want to pick up the pace again both on cash flow and returns, driven by financial performance, capital efficiency and project delivery. Shell's dividend growth - expected to be some 4 percent for Q1 2014 - underscores that momentum and the potential for the future."
Shell's strategy for the forthcoming years consists of three major subjects, including maintaining the existing cash businesses like upstream and delivering near-term cash flow from growth priorities such as deep-water and integrated gas. In addition, the third goal is to identify and mature future opportunities for the longer term, where returns in 2013 were impacted by factors such as losses in North America and the security situation in Nigeria.
"Shell has considerable strengths in portfolio, technology and management capabilities," Van Beurden added. "However, we must improve profitability in several areas. We are taking stock of our investment opportunities and operating positions. Are our assets attractive economically, and are they resilient to industry cycles? Are our plans credible, are they competitive and are they affordable? This approach is driving hard choices on today's asset base, new opportunities, and disposals plans, where we have recently announced exits from Australia and Italy downstream, Wheatstone LNG in Australia, and U.S. gas-to-liquids."