Royal Dutch Shell, the world's second-largest non-government controlled oil company by market capitalization, has posted a net loss of $2.81 billion in the fourth quarter, as the price of oil fell sharply and it wrote down the value of inventory.

The oil giant  however eased investor fears about cashflows by raising its dividend while lifting planned investments.

Shell said its fourth-quarter Current Cost of Supply (CCS) net profit fell 28 percent to $4.79 billon.

However, the ramp up to record crude oil prices above $147 a barrel in July lifted full-year profits to $31.4 billion, a record for a European company and up from $27.6 billion in 2007.

CCS profits strip out unrealized gains or losses related to changes in the value of fuel inventories and is comparable to U.S. firms' net profit figure.

Many investors buy or hold Shell for its fat dividends and some feared lower oil prices would put pressure on payouts. The company eased these fears by proposing a 5 percent rise in its first quarter dividend for 2009 to $0.42 per share.

Shell's London-listed 'A' shares traded down 0.39 percent to 1,769 pence compared to a 0.59 fall in the DJ Stoxx European oil and gas sector index.

'I think the most important thing was that they increased (the expected first quarter 2009 dividend) by 5 percent, which is a sign that management has confidence in the business going forward at the current oil price,' Peter Heijen, oil analyst at Theodoor Gilissen said.

Though many oil companies including US major ConocoPhillips have announced big capital investment cuts, Shell said it planned to expand its investments.

Organic capital expenditure, investment excluding asset sales and acquisitions, is expected to be $31 billion 32 billion in 2009, compared to $30 billion in 2008, the company said.

Some investors feared the collapse in crude prices from a record above $147/bbl in July to around $42/bbl on Thursday, and big capital investment commitments might make it hard for Shell to meet its big dividend payments.

'These are good results, but we would have preferred to see capital expenditure a bit lower,' Alexandre Weinberg, analyst at Petercam said.

Shell said production of oil and gas was essentially flat in the quarter compared with the same period in 2007 at 3.415 million barrels of oil equivalent per day.

Shell's oil sands unit, which produces crude from bitumen-drenched soil, swung to a $30 million loss in the quarter, despite a 44 percent increase in bitumen production, emphasizing how the lower oil price has hit this high-cost business.

In recent years, Shell has invested heavily in capital and energy-intensive unconventional hydrocarbon sources such as Canada's oil sands.

Excluding one-off items and non-cash accounting charges, which amounted to a net gain of $897 million, the fourth quarter CCS result was $3.89 billion, below an average forecast of $4.1 billion from a Reuters poll of six analysts.