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article imageShell cuts spending in U.S. to lower shale exposure

    Mar 13, 2014 in Business

By Karolin Schaps and Dmitry Zhdannikov

LONDON (Reuters) - Royal Dutch Shell <RDSa.L> will cut spending in its American exploration and production business by a fifth and could sell more of its shale assets, in another sign that oil majors are struggling to make profits in the booming sector.

Oil and natural gas pumped from North American shale has boosted the fortunes of smaller energy firms, but the world's biggest oil companies, including BP <BP.L> and Exxon Mobil <XOM.N>, have been slower to realize the full potential of the prolific rock.

London-based BP announced last week it was spinning off its onshore U.S. oil and gas assets into a separate business to help it improve performance.

Shell, which is already selling more than 700,000 acres of U.S. shale assets, said in a strategy update on Thursday that it would reduce spending in its American upstream business by 20 percent compared with last year.

"Shell's ongoing restructuring of this portfolio, could potentially lead to future asset sales and/or impairments," the company said.

In North America, the oil companies have broad exposure to profit-sapping natural gas, a commodity whose price fell to the lowest level in a decade in 2012 but has since rebounded as a cold winter depleted gas in storage.

Sentiment about the fuel's prospects is improving with the prospect of liquefied natural gas (LNG) exports and increased industrial use, but uncertainty remains.

The Anglo-Dutch oil major stuck to its 2014-15 divestment target of $15 billion, of which $4.5 billion has already been announced, including the $2.6 billion sale of its Australian refinery and petrol stations business to oil trader Vitol.

Some analysts said they were disappointed the company was not stepping up its disposal programme to raise more cash.

Shares in Shell were little changed at 1006 GMT, in line with the FTSE 100 <.FTSE> index.

The company's new chief executive Ben van Beurden is expected to provide further details in a conference call later on Thursday.

Van Beurden, who took over in January, will see his base salary trimmed compared to what his predecessor was earning to reflect shareholder sentiment, the company said.

(Editing by Erica Billingham)

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