BP CHIEF executive Bob Dudley has signalled that the oil giant will prioritise projects such as production west of Shetland over investing in shale gas but he supports development of the controversial sector in the UK.

His comments came as BP revealed it had another tough quarter with a fall in second-quarter profits from $3.6 billion (£2.4bn) to $2.7bn, 20% below City forecasts.

The company blamed the drop on lower oil prices, the vagaries of taxation and currency movements on its Russian interests and other currency-linked tax effects.

It also revealed that its Gulf of Mexico oil spill trust fund has almost run out as provisions for compensation costs so far leapt by $1.4bn in the second quarter.

Investors sent BP's shares down 15.95p or 3.4%% to 451.45p.

Asked about BP's interest in the UK shale industry, Mr Dudley said: "We have got major investment plans in the west of Shetland offshore. We think that is our greatest strength."

The massive Clair Ridge scheme could last for a number of years, he said. But he indicated his support for developing the UK shale sector which is currently limited to a site in Lancashire.

"It feels like something the UK should certainly explore to see if it can produce economic benefits."

"It has to be done with great care," he added. "It has to be done with environmental sustainability."

Mr Dudley noted that gas prices in the UK are three to four times those in the United States, where the shale industry has developed greatly in the last few years.

Shale gas production has been blamed for polluting water supplies and causing tremors.

Earlier this year Mr Dudley said that just because BP does not currently have an interest in UK shale "doesn't mean we won't be in the future".

The UK shale industry is proceeding slowly with Scottish Gas owner Centrica the only major player to have shown much interest after taking a 25% stake in Cuadrilla, the only company to have started shale gas fracking in the UK. BP's production for the three months to the end of June was 2241 million barrels of oil equivalent a day, 1.5% lower than the same period last year.

But adjusting for elements such as sales of oil and gas assets, it said that underlying production increased by 4.4% thanks in part to major new projects in the North Sea, Angola and the Gulf of Mexico as well as improved performance from its Trinidad interests.

BP currently has 11 exploration wells in progress, which Mr Dudley said was more than he can remember in the last 15 years.

But BP said that production will fall again in the third quarter as it carries out repairs and maintenance in the North Sea and Alaska.

BP has so far paid out $42.4bn in clean-up, fines and compensation over the 2010 Gulf of Mexico oil spill and Mr Dudley signalled yesterday it is "prepared for the long haul" in fighting what it regards as "false and fictitious" compensation pay-outs.

The second quarter saw BP take another $1.4bn in provisions on claims against a $20bn fund that finances them, leaving the fund with just $300 million left unaccounted for.

BP has said claims beyond what the fund can pay will be taken straight off future profits. However, any impact on the company's cash is not likely to be felt for another 18 months analysts said.

The blow-out of the Deepwater Horizon well off the Louisiana coast in 2010 claimed 11 lives and damaged fishing and tourism as well as marine and wildlife habitats, leading the company to sign a compensation deal in April 2012.

But it is now aggressively challenging the way claims are being handled by a court-appointed administrator and judge.

Mr Dudley said he was open to a legal settlement but said "it's in the interest of our shareholders now to play it long".

He also signalled that BP is prepared to seek repayment of spurious claims.

"BP has not intention of going after the little guy in a smaller business who might have received a cheque," Mr Dudley said. "What we will go after is the big business, in particular the litigation firms."

Brian Gilvary, BP's chief financial officer, said there were "in excess of a billion dollars of claims we believe that are not legitimate".