Fossil fuel giant Shell has abandoned a plan to cut oil production by 1-2% per year until the end of this decade and announced bumper new payouts for shareholders.

The oil major said that it planned to keep the amount of oil that it extracts from wells around the world at the same level as today.

Production from oil and gas reservoirs naturally declines by around 5% every year, so maintaining production at current levels will require major investment from the oil giant.

Two years ago Shell said that the eight billion dollars (£6.3 billion) it planned to invest was “well below” the investment required to offset this decline.

Shell argued that it had already met the 2030 oil reduction target, seeing its production drop from 1.9 million barrels of oil equivalent per day in 2019 to 1.5 million in 2022.

The firm has reduced the amount of oil it produces by selling off oil fields to other companies, who continue to extract fossil fuels from them.

For instance the company offloaded a little under 0.2 million barrels of daily production when it sold its sites in the US Permian basin to ConocoPhillips in 2021 for 9.5 billion dollars (£7.5 billion).

“Our target of a reduction in oil production by 2030 has not changed. We’ve just met it eight years early,” the business said.

Shell said that it intends to grow its gas business.

It also announced a major new incentive for shareholders, as it said it would pay them at least five billion dollars (£4 billion) by buying back their shares in the second half of this year.

New chief executive Wael Sawan, who is trying to please investors who have seen Shell’s shares trade lower than some of its rivals, also said that the dividend would rise by 15%.

Shell said that it would reduce capital spending by between 22-25 billion dollars (£17-20 billion) in 2024 and 2025.

It will also slash its annual operating cost by between two and three billion dollars (£1.59 billion and £2.3 billion) by the end of 2025.

Mr Sawan said: “We are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future.

“Performance, discipline, and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions, while enabling the energy transition.”

He added: “We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system.

“We will invest in the models that work – those with the highest returns that play to our strengths.”