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Shell says North Sea windfall tax won’t ease energy crisis

The Herald

Shell says North Sea windfall tax won’t ease energy crisis

By Mark Williamson Group Business Correspondent

SHELL chief executive Ben van Beurden has rejected calls for a windfall tax on North Sea firms and said the company remains keen to invest in new fields in the area after dropping plans for the controversial Cambo development.

The energy giant may have helped stoke calls for a one-off tax to be imposed on firms to help tackle the energy crisis in the UK yesterday when it posted a 300 per cent increase in annual profits, to $19.3 billion (£14.3bn), from $4.8bn.

The rise was fuelled by the surge in gas prices last year, which has left consumers facing the prospect of swingeing increases in their energy bills.

The regulator said yesterday that the cap placed on the bills of millions of householders on variable tariffs will be raised by around £700 from April, to £1,971 per year.

READ MORE: North Sea firms to make huge payouts to investors after surge in oil and gas prices

Mr van Beurden said he understood the difficulties facing consumers. However, he told journalists a windfall tax would not provide a solution to a problem he suggested regulators had helped cause.

“I understand the concerns, I understand also the need for politicians to react but I would also say let’s take a very close look at what’s caused these problems,” Mr Van Beurden told journalists.

In an apparent reference to the price cap, Mr van Beurden observed: “These problems are of course caused by regulatory changes that need to be updated to make sure that companies like us can continue to invest and that make energy affordable.”

Gas prices have surged because the industry has struggled to keep up with the boom in demand that has followed the easing of lockdown measures around the world.

Mr van Beurden added: “I am not convinced that windfall taxes, popular though they may seem, is going to help us deal with supply nor is it going to help with demand but we stand ready to be in dialogue with government on all the actions we can collectively take.”

The Dutch executive insisted that Shell is doing its bit to help alleviate the energy crisis in the UK through measures such as the diverting of cargoes of gas from Asia.

Shell is also providing support for UK supplies through its oil and gas production operations in the North Sea, which it wants to continue to invest in.

“There’s actually quite a funnel of good gas projects that we want to develop with relatively short time lines” said Mr van Beurden. He stressed the importance of the government ensuring the fiscal environment is favourable, amid competition for investment from other countries.

The company’s enthusiasm for the UK may have been dented by the controversy caused by its plans to develop the massive Cambo find off Shetland. Mr van Beurden vigorously defended the project weeks before Shell announced that it had dropped plans for the development.

READ MORE: Shell boss defends plan to develop Cambo find off Shetland and declares North Sea is outstanding basin

He said yesterday: “Cambo was for me a very clear case of a project that was financially not necessarily the best project in our funnel and factoring in that this could also be a project that could be delayed and have all sorts of issues during its development it did not make sense to allocate money there.”

Shell has said it plans to use the profits generated in the oil and gas business to support investment in the development of the lower carbon energy systems the world will need to help slow climate change.

This will involve the company investing in renewables, helping businesses in sectors such as transport to decarbonise and reducing the emissions associated with oil and gas production.

Mr van Beurden said Shell made good progress on this front last year, after launching its Powering Progress strategy in February.

Shell joined forces with ScottishPower to bid successfully for windfarm acreage in the landmark ScotWind round.

Under plans to simplify the group Shell moved its headquarters to London from the Netherlands recently. The words “Royal Dutch” were dropped from the company’s name last month.

Shell also expects to use the profits made by its operations in areas such as oil and gas and chemicals to fund significant increases in payouts to shareholders.

READ MORE: North Sea cash engine motoring as Shell cuts Aberdeen jobs

The company expects to return $8.5 billion to investors through share buybacks in the first half of this year. It will increase its dividend per share for the first quarter of this year to $0.25 per share, up four per cent from the fourth quarter payment of $0.24 per share.

Shell made $6.4bn profit in the fourth quarter, compared with $0.4bn in the same period of 2020.


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