ROYAL Dutch Shell has given a further signal it will retreat from the North Sea as the company said it will continue with deep cuts in spending amid the crude price plunge.

Chief executive Ben van Beurden said the oil and gas giant will focus investment on the kind of big fields which will generate high returns over the long term and which the company has made clear are in short supply in the North Sea.

Shell is investing heavily in two giant fields West of Shetland with BP, which are due to come onstream in coming months and could be in production for years, but has nothing similar in the pipeline.

In an update on strategy following the recent £35 billion takeover of BG, Shell underlined it has limited interest in operating mature fields, which can be costly to run. Much of the North Sea portfolio is mature.

Last month Shell announced plans to shed 475 jobs in Aberdeen, around a quarter of the total, as it looked to boost profitability in the North Sea where it has said operating costs are too high.

It had already cut 500 jobs since the crude price started tumbling in 2014.

With Mr Henry noting yesterday that mature fields in established areas would be prime sale candidates, the update will heighten expectations that Shell will try to offload North Sea fields if it can find buyers.

Shell declined to say how many North Sea fields it regarded as core.

Mr Henry said Shell is targeting further reductions in running costs with its actions informed by a “lower for ever” oil price mentality.

He noted that 40 per cent of the operating cost budget went on staff.

Shell has been making progress towards achieving the 12,500 job cuts targeted globally in a “respectful way”.

The company expects to be able to squeeze further cost out of the supply chain.

The implications of Shell’s analysis are alarming for other industry players.

It is working on the assumption that the oil price will remain below $50 per barrel this year rising into the mid 60s in 2018.

While Mr van Beurden reiterated the company’s view that growing demand for energy will support prices in future, Shell does not appear to expect a return to the $115/bbl levels reached in 2014.

Directors have increased the target for the amount of synergies they expect to be achieved following the BG deal, to $4.5bn from $3.5bn.

Shell has said it will close BG’s office in Aberdeen.

While the company has been criticised for overpaying for BG, Mr van Beurden said the acquisition has put the company in a good position to achieve sustained growth. The takeover increased Shell’s exposure to key countries such as Brazil and Australia and presented an opportunity to accelerate the reshaping of the company.

“By capping our capital spending in the period to 2020, investing in compelling projects, driving down costs and selling non-core positions, we can reshape Shell into a more focussed and more resilient company, with better returns and growing free cash flow per share,” said Mr van Beurden.

Shell has cut its budget for capital investment in new projects to $29bn (£20bn) this year, the third reduction from an initial $35bn.

It plans to invest $25-$30 billion annually to 2020.

Shell and BG invested around $45bn in total in 2014.

The company plans to sell $30bn assets in the period to the end of 2018. It expects to exit five to 10 countries.

Mr Henry said while the UK is one of 10 states in which Shell expects to have a long term presence the bulk of its investment will be in three other countries: the USA, Brazil and Australia.

In May last year Mr Henry said Shell was not a natural owner of mature North Sea assets.

The push for future growth in the exploration and production arm will focus on deep water. Shell said Brazil and the Gulf of Mexico represent the best real estate in global deep water.

Shell also believes the petrochemicals sector has good growth prospects. It has a big downstream refining and marketing arm which has benefited from lower oil prices.

The company announced it will build a major petrochemicals complex in Pennsylvania. This will use low-cost ethane from US shale gas fields to produce polyethylene for food packaging and car parts.

In the longer term Shell wants to develop the shale positions the company has in the USA and Argentina and to invest in new energies, such as renewables.

Shell will use the cash it generates to cut debt and pay dividends. It will use any balance to fund investment and share buybacks.