Royal Dutch Shell will sell 15 per cent of its refinery capacity in Europe and the Americas and cut a further 1,000 jobs after reporting a slump in annual profits on the back of a 75 per cent drop in profit the October-December 2009 quarter.

Shell reported a 75-per cent fall in fourth-quarter 2009 earnings to $1.2 billion compared with a 33 per cent increase in profits at rival BP.

The company, however, announced a 5-per cent increase in the final-quarter dividend, but said the next three-monthly payout would be held steady at $0.42 per share.

Shell said its full-year 2009 earnings fell 69 per cent to $9.8 billion.

Shell, which cut some 5,000 jobs or 10 per cent of its workforce (See: Shell to cut 5,000 jobs after poor Q3 results) and reduced its underlying operating costs by some $1 billion in the fourth quarter 2009, and by over $2 billion in 2009 as a whole, said it would slash another 1,000 jobs and reduce underlying costs by another $1 billion in the current year. 

"For 2010, we are targeting a further underlying cost reduction of at least $1 billion, and a reduction of some 1,000 employees," Peter Voser, chief executive of Shell, said, adding that much of that would come from downstream and ongoing cost cutting initiatives.

Shell said it was slowing down investments in high-cost production lines such as the tar sands of Canada and was instead looking at $3 billion (£1.89 billion) in divestments.

"We are not selling for the sake of selling. We are selling for the sake of value. If the value is not right we will not sell," Voser added.

Shell, which reported a $1.8 billion loss from downstream operations over the last three months, said it would dispose of its last remaining refinery in the UK, at Stanlow in Cheshire, which produces a sixth of the country's petrol as it shifts downstream focus to Asia.

Shell would also sell its refineries in Montreal, Canada and Heide and Harburg in Germany, reducing its refining capacity by 560,000 barrels.

Voser said the move has been triggered by lower oil prices and higher costs and not due to environmental fall-outs of its exploration activities.

"Our strategy is on track, although the near-term industry outlook does remain challenging. We are taking steps to improve our performance, to bridge the company, and our shareholders, into a period of significant growth in the coming years," he added.

He said the company's `Transition 2009' programme, launched in mid-2009, was now complete and Shell has reduced complexity and the new organisation is now fully up and running.

"Our Upstream organisation is simpler and our new projects and technology organisation makes for better technical integration on bigger projects and a sharper innovation focus along the value chain," he added.

In 2009, Shell successfully started projects like Sakhalin II in Russia and BC-10 in Brazil as also the Ormen Lange in Norway and completed their production ramp-ups.

In Australia, Shell said it has accepted Woodside Petroleum Ltd's entitlement offer of new shares at a total cost of $0.8 billion, maintaining its 34.27 per cent share in the company.

Shell has won a contract as lead operator in developing the Majnoon field (share 45 per cent) in Iraq. Production is expected to reach 1.8 million barrels of oil equivalent per day (boe/d), up from a current level of approximately 45,000 boe/d (100 per cent basis). In addition, Shell was awarded a 15 per cent share in a contract for the development of the West Qurna 1 field.

Shell has agreed an asset swap to acquire assets in Gabon and in the UK North Sea, in return for its interest in a pair of Norwegian offshore fields.

In Egypt, Shell signed agreements to acquire a 40 per cent holding and become the operator on the Alam El Shawish West Concession, where oil and gas discoveries have been confirmed.

In Bolivia and Brazil, Shell has sold its share in a gas pipeline and in a thermoelectric power plant and its related assets for a total of $100 million.

During 2009, Shell participated in 10 discoveries, in Australia, the US Gulf of Mexico, Malaysia and Norway.

Shell also announced the start-up of its new world-scale monoethylene glycol (MEG) unit at the Shell Eastern Petrochemicals Complex in Singapore with a nameplate capacity of 750,000 tonnes per annum.

Also in Singapore, Shell sold 49 per cent of its share in two chemicals joint ventures (Petrochemical Corporation of Singapore and The Polyolefin Company).

In Australia and New Zealand, Shell announced the sale of its share in two bitumen joint ventures. The sale will be concluded in several phases and finalised by 2014, it said.