* Shell raises expected benefits from deal to $3.5 bln
* Says to reduce 2015 costs by $11 bln
* Says will maintain dividend, share buyback plans (Adds CFO comment, details on Integrated Gas business, updatesshares)
By Ron Bousso and Dmitry Zhdannikov
LONDON, Nov 3 (Reuters) - Royal Dutch Shell soughtto ease investor concerns over its planned $70 billion takeoverof BG Group on Tuesday, announcing further benefits andcost cuts aimed at making the deal work with an oil price in themid-$60s a barrel.
The Anglo-Dutch group, which hopes to complete the dealearly next year, said it now expected savings to increase by $1billion to $3.5 billion for the combination which will makeShell a leader in liquefied natural gas (LNG) and offshore oilproduction in Brazil.
Shell, which last week reported a huge third-quarter loss due to $8 billion of write-offs in Alaska and Canada, said itwould cut costs by $11 billion in 2015 to cope with a prolongedperiod of lower oil prices, currently trading below $50 perbarrel.
"Although oil prices have fallen in 2015 the valuation casefor the BG acquisition still looks compelling today for bothsets of shareholders," Shell Chief Executive Ben van Beurdentold reporters.
Investors have been concerned that the deal would be at riskas a recovery in oil prices is now expected to take much longerthan predicted in April, when the BG transaction was announced.
Back then, Shell indicated it expected oil prices to recoverto $90 a barrel by 2020.
Brent crude was around $59 per barrel when the dealwas announced and has since traded between about $42 and $69amid a growing consensus among analysts that prices are set tostay "lower for longer."
"The benefits (of the acquisition) come from delivery ofgrowth projects which will deliver cash flows not over 6 monthsor 12 months, but over 15-20 years, that's the real value,"Shell Chief Financial Officer Simon Henry told investors.
To make the integration of BG's large gas-focused business,and especially its prized liquefied natural gas unit, easier,Shell said it would create a new upstream organisation calledIntegrated Gas.
Maarten Wetselaar, Shell's Singapore-based head ofintegrated gas, will lead this business, which alone generated$11 billion of cash flow over the past three years, from theNetherlands starting Jan. 1, Shell said.
VALUATION GAP
BG shares trade at a discount of more than 10 percent to thevaluation of the cash and shares deal, reflecting investorconcerns over its viability and remaining regulatory hurdles.Shell needs the approval of Australian and Chinese regulatorsbefore the deal can be put before shareholders.
Shell shares were up 1.4 percent by 1422 GMT, trailing a 1.7percent rise in the European oil and gas sector. BGshares were up 1.6 percent.
"No real new surprises today. We expect more in terms ofpre-tax synergies once the two groups combine," Brendan Warn,Managing Director of International oil & gas equity research atBMO Capital Markets, said.
"Shell's commitment to operate at a lower oil environmentand maintain share buyback may reduce some investors' concerns."
BMO rates Shell as "underperform."
Shell reiterated plans to sell $50 billion worth of assetsbetween 2014 and 2018 partly to cover the cost of theacquisition.
It said it would maintain its dividend payout in 2015 and2016 at $1.88 per share, turn off scrip dividends in 2017 andundertake a share buyback of at least $25 billion in 2017-2020.
The $3.5 billion savings were expected to comprise of $2billion from operating costs, mainly in the corporate and ITunits and another $1.5 billion in exploration spending in 2018.The savings will result in a one-off charge of $1.23 billion.
"The BG deal will make will Shell a far better companybeyond 2017, but until then a lot of divestments and levers needto be pulled to cover dividend," Warn said.
(Additional reporting by Karolin Schaps; Editing by Keith Weirand Jane Merriman)
