ROYAL Dutch Shell emphasised its scepticism about the potential for shale gas in the UK after writing around $2 billion (£1.3bn) off the value of such unconventional assets in the US.

The oil and gas giant suffered a sharp drop in profits in the second quarter as the costs of reverses in the US weighed on the bottom line.

News that the company made a $2.4bn profit on a current cost of supply basis compared with $6 billion in the same quarter a year ago sent shares in Shell plunging 5%.

"These results were undermined by a number of factors - but they were clearly disappointing for Shell," said chief executive Peter Voser.

The fall in profits also reflected problems in Nigeria. Mr Voser said oil theft and disruptions to gas supplies could cost the Nigerian government $12bn in lost revenues annually.

However, analysts highlighted the challenges Shell appeared to be facing in its American exploration and production business. This made a loss in the second quarter, mainly as a result of the cost of unsuccessful wells and increased operating expenses.

Shell said the upstream American business is expected to remain in a loss during "at least the second half" of 2013.

The company said it will rationalise the North American portfolio, which it has expanded through acquisition to include a significant base of shale assets.

Mr Voser insisted Shell's decision to make a big bet on US shale exploration acreage would pay off.

But asked if Shell would follow Scottish Gas owner Centrica and invest in shale gas in the UK, Mr Voser said he was very sceptical about the potential for such resources in Europe.

He said much more work needed to be done before firms could assess the size of the potential resource base.

Noting issues of "permitting and population density" would pose big complications, he said Shell takes a "very, very cautious" view on European shale.

Chief financial officer Simon Henry was similarly sceptical in Shell's first quarter results announcement, but the company is investing heavily in shale in some parts of the world.

On Tuesday BP chief executive Bob Dudley signalled the oil giant would prioritise projects like production west of Shetland over investing in shale gas. But he said the UK should explore if shale could deliver economic benefits.

BP and Shell both plan to invest billions of pounds in UK waters developing assets such as the Clair Ridge field off Shetland.

This is the kind of bumper project Mr Voser has focused investment on in the expectation of generating profitable growth.

Shell expects to see five major project start-ups in the next 18 months, which it estimates will add over $4bn to its 2015 cash flow.

The company plans to remain a significant player in Nigeria but will offload some assets.

Mr Voser, who is due to retire and be replaced by downstream chief Ben van Beurden at the end of this year, defended Shell's decision to scrap its production target for 2017.

He said that the company would focus on growing earnings and cash flow.

Shell made $4.6bn profit in the second quarter excluding one offs, compared with $5.7bn in the same period last year.

The price it got for oil production fell 9% compared with the same quarter in 2012.

The group made $12.1bn profit in the first half, versus $13bn last time.

Shell announced a second quarter dividend of $0.45 per ordinary share, compared with $0.43 per share for the same period last year.

Royal Dutch Shell a shares closed down £1.05p at £21.33.