Shell has appealed for policy “stability” to support its proposed investments of up to £25 billion in Britain this decade, but has admitted that a windfall tax would not necessarily halt its plans.
The oil major acknowledged that consumers were facing “a lot of pain” from the soaring energy prices that had helped it to achieve its highest quarterly profit of $9.1 billion in the first three months of the year. It said a windfall tax was “a matter for government”, as opposition parties renewed calls for such a levy to be imposed on giant oil companies to fund help for consumers struggling with soaring bills.
The government has ruled out a windfall tax on the ground that it would deter investment in energy. However, Bernard Looney, BP’s chief executive, said this week that his company would press ahead with up to £18 billion of planned investments in Britain this decade even if a levy were imposed.
Shell intends to invest between £20 billion and £25 billion in the UK this decade, with about 75 per cent of that in low-carbon or zero-carbon technologies such as offshore wind farms, electric vehicle charging, hydrogen and carbon capture and storage.
Ben van Beurden, Shell’s chief executive, said it had “a very strong commitment to investing in the UK, because we see the policies in the UK being very supportive for the sort of investments we would like to make”.
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He said the £20 billion to £25 billion of proposed investment was “a very firm plan that we want to carry out” and admitted: “If there was a windfall tax on the North Sea, would that impact our plans for electric vehicle charging investments? I suppose not.”
However, he added: “If you talk about these types of investment levels, of course they do require a stable and a predictable financial outlook. It does require stability of policies and everything else.”
Van Beurden, 64, acknowledged that high energy prices were “very painful for a lot of people”. He said that Shell’s UK household energy supply division was offering hardship provisions for customers, but that the FTSE 100 company’s main contribution was to invest in new British energy supplies.
Sinead Gorman, 44, Shell’s new chief financial officer, said it wanted to talk to the government to see if it could “get the approval processes going” for its proposed Jackdaw field development. The gasfield was blocked by environmental regulators last year, but Shell has submitted a revised proposal. However, she said there was “no change” in its position on the Cambo oilfield to the west of Shetland, which Shell said it was pulling out of last year amid opposition from environmental groups.
Shell received a £132 million tax refund from its North Sea business last year, the fourth year running where it received a rebate thanks to a system of decommissioning tax relief. Gorman expected Shell to pay tax in the UK this year, given the present prices: “I expect that we will be paying hundreds of millions in the UK in years to come . . . You will see us being a taxpayer in the UK, assuming this macro continues.”
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Behind the story
Europe faces a “tough winter” if it does not have gas supplies from Russia, the boss of Shell has warned (Emily Gosden writes).
Ben van Beurden said that shipments of liquefied natural gas could not easily replace pipeline gas from Russia, and added: “If we have a major disruption or a boycott on Russian gas into Europe, that will be a major hole in the whole supply picture.”
He made the comments as Shell announced a $3.9 billion post-tax impairment charge for writing off most of its own assets in Russia and said it was making “good progress” in extricating itself from its businesses in the country.
Russia supplies about 40 per cent of Europe’s gas by pipeline. While the Continent is to embargo Russian oil, it has resisted Ukrainian calls to stop buying Russian gas because of fears this would lead to severe shortages.
“It will be a tough winter if we don’t have any Russian molecules coming into Europe. That’s the only thing I can say with a high degree of certainty,” Van Beurden said.
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He warned there was “no silver bullet” for the difficult challenge of replacing Russian gas to Europe and that LNG could not provide a “quick fix”. Replacing all Russian gas with LNG would require Europe to buy up “the entire spot market”, increasing its total LNG imports to more than half of the global LNG market. “I don’t think that is likely or credible and if we tried, I hate to predict what the price would be,” he said.
The Shell boss forecast a “rocky ride” for oil and gas prices with “a lot of volatility”, driven by “tightness in the market”. Investment in oil and gas had been insufficient to keep up with demand even before the disruption and “fear factor” from the war, he said.
Shell has condemned Russia’s invasion of Ukraine and vowed to exit all its hydrocarbon interests in Russia, including its stake in Gazprom’s huge Sakhalin LNG plant in Russia’s far east, and 500 petrol stations. Van Beurden said it was making “good progress” in trying to sell its assets but could not say how long it would take, adding that “even if we find buyers and we agree a sales and purchase agreement, it’s still subject to the Russian Federation approval”.
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Shell stopped buying Russian oil and gas on the spot market after an outcry in early March but is still buying under long-term contracts and it said this could involve a “small fraction” of oil purchases continuing into next year.
Shell still has about $1 billion of Russian assets on its balance sheet, reflecting an expected dividend from Sakhalin, some of its product inventory and contracts for gas supply into Europe.
