(Corrects spelling of Permian Basin in paragraph 10)
* Anglo-Dutch oil major posts 31 pct rise in headlineearnings
* Decline in oil prices offset by strong refining, oilproduction
* Appoints Charles Holliday as new chairman
By Ron Bousso and Dmitry Zhdannikov
LONDON, Oct 30 (Reuters) - Royal Dutch Shell hasoutpaced peers with a forecast-beating rise in quarterly profitand said it would spend heavily next year on key projects, evenas oil majors prepare to weather the full impact of a sharp dropin oil prices.
European peers BP, Total and Eni have all met or beaten analysts' forecasts in a third quarterthat ended before the worst of the price fall -- but Shell sawthe biggest increase.
Its adjusted net profit climbed 31 percent, thanks to moreprofitable new production and improved refining.
Oil prices have slumped over the past four months by morethan 20 percent to a four-year low near $85 a barrel due toslowing global demand particularly in China and ample supplies,erasing billions from oil companies' market value.
Benchmark Brent crude oil prices, however, averaged $103 abarrel in the third quarter.
The declining oil prices and the prospect of pain ahead haveforced companies to review some low-margin projects andincreased the urgency of asset sales that have so far cushionedthe impact of weaker revenues.
Shell has so far this year sold $12 billion of assets,including the sale of its downstream Australian business in thequarter, putting it on track to hit a target of $15 billion.
That compares with $50 billion worth of assets sold or beingsold by BP and $40 billion by Total, as majors have come underpressure from shareholders to increase dividend payouts.
"It is quite likely we will take a very close look at levelsof investment where we have flexibility if we see the oil priceweakness persisting," Chief Financial Officer Simon Henry said.
Shell, Europe's biggest oil company by market value, is"less likely", however, to go ahead with some unconventionalshale oil developments in the U.S. Permean Basin and in WestCanada, if oil hits $80 a barrel, he said.
But cuts will not slow its bigger projects and organiccapital expenditure will likely remain flat in 2015 at thisyear's $35 billion level.
"The worst thing we can do is stop a project in mid flow,because that means value destruction," Henry said. "We do havesome flexibility in exploration, in small projects, in refining,mature upstream assets and in unconventional shale business."
SWEET SPOT
Shell's adjusted net profit in the third quarter hit $5.8billion, with the company maintaining its dividendquarter-on-quarter and increasing it 4 percent year-on-year, asboth upstream and downstream divisions delivered strong results.
Earnings nevertheless declined from the second quarter ofthe year, mostly due to weaker oil prices.
Shell has one of the most robust balance sheets in thesector, with stronger debt ratios than its peers. Analystsexpect it to maintain its dividend payout and continue to buyback shares, even in the face of weaker prices.
But analysts also said Shell would not be immune from thestrain on the broader sector, and some questioned whether it wasdoing enough.
"We remain somewhat concerned that the business improvementinitiatives begun by new CEO Ben van Beurden will not besufficient to offset this seasonal weakness, which is likely tobe amplified by the current macro headwinds," said BMO analystIain Reid.
Strong refining margins as a result of the lower crude oilprices lifted Shell's downstream earnings in the third quarter,doubling profit to $1.8 billion from a year earlier.
Shell's oil and gas production in the quarter was 5 percentlower than in the same quarter last year at 2.79 million billionbarrels of oil equivalent per day, as the ramp up of productionin the Gulf of Mexico and West Africa failed to offset theexpiry of the Abu Dhabi licence.
Shell also said on Thursday it had appointed former bankerCharles Holliday as its chairman. Holliday, a former chairman ofBank of America, will take over from current chairman and formerboss of Finland's Nokia, Jorma Ollila, in 2015. (Editing by Susan Thomas and Clara Ferreira Marques)
BP (BP.)
