Shell has warned it could ditch its pledge to invest £25bn in the UK’s energy sector, after Chancellor Jeremy Hunt beefed up the windfall tax last week.
David Bunch, chairman of Shell’s UK operations, confirmed the energy giant will “evaluate” its spending pledges – which includes 75 per cent in low carbon and renewable projects – and push for changes to the expanded Energy Profits Levy.
“We’re going to have to evaluate each project on a case-by-case basis. When you tax more you’re going to have less disposable income in your pocket, less to invest,” he told the CBI Conference in Birmingham yesterday.
His comments are the latest blow to the UK’s ambitions to ramp up investment in the North Sea to boost the country’s supply security and stave off blackouts this winter.
Harbour Energy told City A.M. last week it was “reviewing” the impact of the tax on its UK operations, and would pursue talks with ministers and officials.
City A.M. understands Shell has not yet jettisoned the £25bn commitment, but would look at investment on a case-by-case basis.
When approached for comment, a Shell spokesperson said the company recognised the burden “increased prices have across society” but argued taxes needed to be designed to boost investment as well as raise revenues to support people.
Shell is now calling for the inclusion of a price backstop to recognise the reality that wholesale prices move down as well as up, and an expanded capital allowance to include further decarbonisation investments such as CCUS, hydrogen production and wind generation
The Government ramped up the windfall tax following another round of bumper profits across the oil and gas sector in the third quarter of trading this year.
Earnings were fuelled by soaring oil and gas prices, with commodities booming this year following Russia’s invasion of Ukraine and a Kremlin-backed supply squeeze on Europe.
Last month, Shell reported third quarter profits of £8.1bn ($9.45bn) for the three-month trading window, with cash flow from operations clocking in at £10.76bn ($12.5bn).