Thursday, September 28, 2023
Oil & Gas

Reports: Oil giant Shell to review £25bn of spend after windfall tax hike

Supermajor Shell (LON: SHEL) is to review as much as £25 billion of UK investments following the government’s decision to ramp up the windfall tax.

UK chairman David Bunch reportedly told Sky News that the London-listed group will now look at its proposed energy projects on a “case-by-case basis”.

It follows the Chancellor, Jeremy Hunt’s decision to increase the energy profits levy on North Sea company’s profits by a further 10%.

It means oil and gas producers now face losing up to three quarters of their takings, with the windfall tax at 35%, and the regular levy at 40%.

Investment relief, allowing firms to claim back a large proportion of their spend on new projects, is in place in an effort to boost energy supplies.

READ MORE:  Interview: Ithaca Energy on fresh hunt for Cambo partner

As a result, Shell paid no windfall last quarter, despite returning quarterly pre-tax profits of $11.4 billion.

But in an interview with Sky News, Mr Bunch flagged the harming impact of fiscal uncertainty on the oil and gas industry following the latest hike.

© Supplied by All-Energy
David Bunch, UK country chair at Shell.

He said: “We outlined an investment package five months ago of £25bn, and the one thing I said was we really need a stable fiscal environment to make sure we can get that investment out of the door.

“Since then we have had three budgets, a couple of prime ministers, so it’s welcome to see some stability.

“But we are going to have to look at each of those projects on a case-by-case basis and re-evaluate them, based on the current fiscal outlook, and that will determine whether or not we invest to the amount we previously discussed.”

READ MORE:  Sonangol plans Paenal restructuring to face the future

Apparently he also called on Westminster to give further details on when the windfall tax might expire.

In the original levy, a sunset clause of 2025 was included, while the policy would also fall away if oil traded at below $70 a barrel.

But Mr Hunt pushed back the finishing line until 2028, and did away with the oil price mechanism altogether.

windfall tax © George Cracknell Wright/LNP/Shut
Chancellor Jeremy Hunt

Mr Bunch told Sky News: “As the UK’s biggest company we need to do our part. We understand the need that is out there, and I think we understand the nature of the windfall tax.

READ MORE:  North Sea body accuses CCC climate report of being ‘paradoxical’

“However, the current design of the windfall tax does not have an off switch. It doesn’t have a price point at which that windfall tax turns off. That is something we would like to talk to the government about.

“We are still incredibly committed to the UK, it’s a great market, we’re the biggest company, we put out a great investment programme, I’d really like together with what we heard today from Rishi to help create that environment so we can help build a sustainable energy future, but doing that is going to need a few different levers.”

Recommended for you

Equinor rosebank

Equinor ‘still working hard’ on sanctioning Rosebank oilfield despite windfall tax

Leave A Reply

Your email address will not be published. Required fields are marked *