Shell cuts spending by $15B but retains Arctic drilling program

Royal Dutch Shell plans to cut global capital spending by $15 billion US from2015 to 2017 in response to falling oil prices.

But the Anglo-Dutch energy giant is sticking to plans to drill for oil in the Arctic off Alaska, a plan that could put it on a collision course with a new U.S. plan limiting oil development in the Arctic.

Shell said its fourth quarter net income fell 57 per cent to $773 million after the price of Brent crude, the oil contract most traded in internationally, fell about 50 per cent since last summer.

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The $15 billion reduction in capital spending puts its 2015 spending to below the levels of 2014, and Shell says it may revise its investment still lower later in the year.

Its stock fell 3.5 per cent in London trading.

Shell is not the only oil company announcing deep cuts to spending plans. Canadian oilsands driller Cenovus announced reduced spending for 2015 yesterday.

Cuts at U.S. oil companies

Today the third- and fourth-largest U.S. oil companies ConocoPhillips and Occidental Petroleum Corp. slashed exploration spending plans for this year,

ConocoPhillips cut its 2015 spending by a further 15 per cent to $11.5 billion, following on a 20 per cent cut in December. Occidental said it would slash its capital budget by 33 per cent to $5.8 billion this year.

Those cuts wont stop the gush of light U.S. oil that has flooded markets and helped push oil prices lower. Conoco now expects oil and gas output to grow 2-3 per cent and Occidental says its output will be up six per cent.

West Texas Intermediate, the contract most traded in North America, now is at $43.98 US a barrel, down 57 per cent since last year.

In a controversial decision that will anger environmentalists, Shell said it expects to drill in Alaska's Chukchi Sea beginning this summer.

CEO Ben van Beurden accepted that Arctic drilling "divides society", but said the world needs new sources of oil.

The company has already spent $1 billion on exploration and preparation in the area.

The U.S. government is soon to announce new rules that could limit new oil development in the Arctic.