Shell to evaluate £25 billion British investment plans following windfall tax announcement
25 November 2022
Shell’s UK Country Chair has said the energy major would be evaluating plans to spend up to £25 billion in Britain over the next decade on a “case by case basis” following the UK government’s decision to increase a windfall tax on oil and gas producers.
David Bunch’s comments came at the Confederation of British Industry’s (CBI) annual conference in Birmingham on November 21. Bunch told the conference: "When you tax more you're going to have less disposable income in your pocket, less to invest."
Chancellor of the Exchequer Jeremy Hunt announced the government’s budget plans on November 17 which included the Energy Profits Levy (EPL). The tax will see an increase in windfall tax on North Sea oil and gas producers from 25% up to 35%. The UK government says the tax, which has also been extended to 2028, will raise around £40 billion and help fill a major gap in public financing.
In response to the EPL, Shell said the tax should provide incentives to address energy shortages and long-term investment in renewables. The company had announced earlier in 2022 that it had plans to invest around £25 billion in energy infrastructure across the UK, including hydrogen, offshore win, as well as oil and gas projects.
Offshore Energies UK (OEUK) has said the UK’s offshore industry will be hit hard by the EPL which it said threatens to drive out investors, drive up imports and leave consumers increasingly exposed to global shortages. OEUK said the tax changes would impact not just North Sea operators but the hundreds of other companies in their supply chains, operating in towns and cities across the UK.
Deirdre Michie, OEUK’s Chief Executive, said that consumers were suffering, and it was right for all sectors to play their part but added: “These tax changes will undermine one of the UK’s most important industries. The UK offshore industry generates jobs for 200,000 people plus billions of pounds in taxes. The oil and gas it produces buffers the nation against global shortages. These changes put all those benefits at risk.”
Michie added: “We remain proud to pay our taxes, but this latest increase means UK offshore operators will be paying a total rate of 75%. This rate is so high that it threatens to drive investment out of the UK altogether. The extension to 2028 takes no account of the likelihood of prices falling in that time. It’s also worrying that we are increasing taxes on low-carbon electricity generation like offshore wind. But it’s not just the rate that is so damaging. It’s also the disruption and uncertainty generated by constant changes to our tax system.
“No industry can invest or plan without knowing what kinds of tax regime will be in place. We want to work with the government to build a long-term tax regime that will let us play a full role in the energy transition.”