With oil prices down 60.0% over the year, Big Oil is seeing a corresponding drop in profitability. Royal Dutch Shell announced on Wednesday a 61.6% slide in first-quarter profits, to $3.5 billion, only a day after BPsaid its own quarterly profits had fallen by 64.0% over the year. But like its rivals, Shell is building up its defensiveness and cutting costs–it just remains to be seen by how much.

Shell stuck to its previous guidance on capital expenditure for this year on Wednesday, or $31-$32 billion, which would only represent a slight decrease from last year’s figure of $32 billion. But incoming chief executive Peter Voser admitted that this “could change” over the course of 2009, and after BP cut spending forecasts for this year it seems likely that Shell will also tighten its belt to adapt to oil at $50 per barrel.

Shell’s upstream earnings fell 67.0% over the year. The company blamed militant attacks in Nigeria and quota restrictions from the OPEC oil-exporting cartel for its reported 7.0% drop in crude oil production. Project developments in the first quarter included the first exports of liquefied natural gas from the Sakhalin-II site in Russia, and an extension to its gas joint venture with the Abu Dhabi National Oil Company.

In the downstream, Shell said oil trading and business-to-business sales helped earnings fall only 9.0% over the year, on a constant cost of supplies basis.