* Expects to distribute $125 bln between 2021-25
* To raise spending to average of $30 bln after 2020
* Shares down 1.3%(Adds detail, shares)
By Ron Bousso
LONDON, June 4 (Reuters) - Royal Dutch Shell onTuesday outlined plans to increase spending and dividends after2020 in a show of confidence despite an uncertain outlook foroil and gas prices.
In a strategy update, the Anglo-Dutch energy company alsooutlined a vision for a future business that focuses moreheavily on its gas, power and chemicals divisions as the worldtransitions to a lower-carbon economy.
The plans to increase spending on oil and gas projects comeas Shell set out the sector's most ambitious targets to reducegreenhouse gas emissions from its operations in an effort tocomply with the 2015 Paris climate agreement.
Shell shares were down 1.3% in early trading.
Shell said it was on track to deliver on its commitment toincrease cash generation and carry out one of the world'slargest share buyback programmes of $25 billion by the end ofnext year.
The world's second-largest listed oil and gas company afterExxon Mobil, underwent deep cost cuts following its 2016acquisition of BG Group for $53 billion and the collapse of oilprices in late 2014.
Despite a slow and bumpy recovery in oil prices, it reportedthe largest profit among its peers last year and a jump inrevenue from previous years.
"It is the success of our strategy and strength of ourdelivery today that gives us confidence for the future," ChiefExecutive Officer Ben van Beurden said in a statement.
Shell said its free cash flow - cash available for dividendsand share buybacks - is set to rise to around $35 billion peryear by 2025 based on a Brent crude oil price of $60 per barrel.
That compares with $28-33 billion in free cash flow itexpects to deliver by the end of next year.
It said the cash delivery "creates the potential todistribute $125 billion or more to shareholders" in the form ofdividends and share buybacks between 2021 and 2025.
That compares with distributions of around $90 billionbetween 2016 and 2020.
SPENDING MORE, GIVING MORE
Shell expects to increase its dividend payouts toshareholders once it completes the $25 billion share buyback bythe end of 2020 it promised following its BG acquisition.
Shell, the world's biggest dividend payer at $16 billion ayear, last increased its quarterly dividend in the first quarterof 2014 to $0.47 per share.
But while offering sweeteners to investors, Shell alsooutlined plans to increase its spending in the next decade.Rival Exxon and Chevron also plan to increase spending.
Shell said its capital spending will average $30 billion peryear between 2021 and 2025, with a ceiling of $32 billion.
The target excludes major acquisitions.
Shell has in recent years vowed to maintain its spending atthe lower end of a $25-30 billion range. It spent $24.8 billionin 2018.
(Reporting by Ron Bousso; editing by Jason Neely and LouiseHeavens)