ROYAL Dutch Shell has said the North Sea remains an important part of its portfolio and underlined the potential of a huge find off Shetland as it slashes costs in response to the coronavirus crisis.

The Anglo Dutch giant underlined the scale of the challenge caused by the plunge in oil and gas prices triggered by the virus yesterday when it announced the first cut in its dividend since the Second World War.

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Chief executive Ben van Beurden said the 65 per cent cut in the first quarter payout was a prudent move. He believes it will help ensure the company can cope with the impact of what could be a prolonged period of low oil prices while continuing to invest in growth.

Shell’s underlying first quarter profits fell 46 per cent, to $3bn from $5.4bn, as demand for its products dropped across the board.

Mr van Beurden noted Shell expects to cut annual running costs by up to $4bn over the next year and to reduce spending on new assets by $5bn.

Asked how the cost cutting and its plans to support the move to a lower carbon energy system would impact on Shell’s North Sea business, he said the company will defer projects in the area.

However, Shell’s chief financial officer Jessica Uhl added: “It is an important part of our portfolio and in more normal circumstances we would be investing further in the North Sea.”

Shell said last month that it would defer making a decision about whether to develop the bumper Cambo find West of Shetland until next year.

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As Cambo is estimated to contain 800 million barrels oil and is reckoned to be one of the biggest undeveloped finds on the United Kingdom Continental Shelf the decision was a disappointment for the North Sea industry.

But Ms Uhl said the Cambo decision was tactical rather than strategic. She indicated the field could be developed if conditions improve.

“That was a project we supported at the end of last year, early this year, which is an indication in a very competitive environment for capital allocation we’re still directing capital towards the North Sea,” said Ms Uhl.

Last year she hailed a “huge step up” in the performance of the North Sea business. It is led by Steve Phimister.

Shell retrenched in the North Sea after the oil price slumped between 2014 and 2016. It shed hundreds of jobs and sold a range of non-core assets.

It has focused investment on big fields including developments West of Shetland.

Asked whether Shell expected to cut any jobs across its global operations, Mr van Beurden said: “At this point in time we’re not going to have fixed redundancies to take care of our cost problem.”

But he said in the longer-term Shell may have to look at redundancies as it reviews its business models and aims to right size aspects of its portfolio. He did not say how that might impact on operations in the UK.

Mr van Beurden noted Shell’s business plans have not yet been adapted to reflect the company’s ambition to become a net zero company in terms of carbon emissions by 2050, which it announced in April.

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He said the decision to cut the dividend, to 16 cents per share from 47 cents, had been hard but had been made with the interests of all stakeholders in mind.

Citing the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, he described the cut as a prudent step to bolster Shell’s resilience, underpin the strength of its balance sheet and support long-term value creation.

Tom Ellacott of the Wood Mackenzie oil and gas consultancy said the cash-saving move was sensible and prudent in the face of huge macro uncertainty.

Noting the cut will free up $10bn of capital, he said: “A permanent dividend reset could also accelerate the strategic pivot to 'Big Energy' through the reinvestment of more retained earnings in the youthful zero-carbon energy sector.”

Mr Ellacott said Shell’s dividend cut had thrown down the gauntlet to other supermajors.

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On Tuesday BP increased its first quarter dividend to 10.5 cents per share, from 10.25 cents.

But Sven Reinke at credit ratings agency Moody’s cautioned: “While the significantly reduced dividend protects Shell’s cash flow generation and liquidity, it is also a sign of a severely negative outlook for 2020.’

Shell recorded a bottom line loss of $23m after tax in the first quarter, compared with a $6.2bn profit last time.

Royal Dutch Shell A shares closed down 160.8p at £13.25.

Brent crude sold for $25.31 per barrel yesterday afternoon, compared with around $70/bbl in January.