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Shell yet to pay any extra windfall tax, bosses confirm

Evening Standard

Shell yet to pay any extra windfall tax, bosses confirm

Oil giants were hit by an extra windfall charge in May this year, but they could get around it by investing more in the UK.

By August Graham: 27 Oct 2022

Oil giant Shell has avoided paying any extra windfall tax despite making record profits so far this year as the business said it was investing heavily in the North Sea.

The company said that it does not expect to pay any extra tax this year due to the Government’s decision in May to put a windfall tax on North Sea oil and gas producers.

Finance boss Sinead Gorman told reporters on Thursday that the company had done enough over recent months to avoid the tax – which allowed companies to get tax relief in exchange for investment.

“Heavy capex (capital expenditure) has meant that we haven’t had extra tax coming through in this quarter yet,” she said.

“I do expect to see that extra tax … to happen quite early in the first quarter of 2023, but we’ll see what plays out with prices as well.”

She added: “We simply are investing more heavily than we have, and therefore we don’t have profits which we can be taxed against.”

It came as the oil giant reported it had added around 9.5 billion dollars (£8.2 billion) to its profit in the three months to the end of September, and that it would pay out an extra four billion dollars (£3.5 billion) to shareholders.

The earnings are nearly twice the level of the same quarter last year, although down slightly from 11.5 billion dollars (£9.9 billion) in the previous quarter, when oil prices were higher.

The windfall tax was introduced by then Chancellor Rishi Sunak in May as an attempt to rein in the astronomical profits of the oil and gas companies.

But it has also been criticised as not going far enough, including by Labour and the Lib Dems.

Ben van Beurden, the chief executive of Shell, told reporters that it was up to Government to decide whether the tax had succeeded.

“In principle a tax system that incentivises people, rather than just taxes people, is a good design, whether it meets all the requirements of what a Government needs is for the Government to decide,” he said.

Shell is now nine months into what promises to be the company’s most profitable year ever, barring an unlikely major collapse in oil and gas prices over the next two months.

The business was already benefiting from a global economy that had reopened after the pandemic and was desperate for energy to fuel its growth.

Then Russian President Vladimir Putin launched an unprovoked attack on Ukraine. This pushed European gas prices to all-time highs and the price of oil soared internationally.

It has helped Shell to hand billions of dollars to its shareholders this year.

On Thursday it announced plans to return another four billion dollars (£3.5 billion) to shareholders by buying back shares over the next three months and said it will also increase the dividend by 15%.

It takes the total payout to Shell shareholders to 26 billion dollars (£22.4 billion) so far this year.

Mr van Beurden said: “We continue to strengthen Shell’s portfolio through disciplined investment and transform the company for a low-carbon future.

“At the same time we are working closely with governments and customers to address their short- and long-term energy needs.

“Today we are announcing a new share buyback programme resulting in an additional four billion dollars of distributions, which we expect to complete by our Q4 (fourth quarter) 2022 results announcement.”

Greenpeace on Thursday called for a “proper tax” on the energy giant’s profits, which it said could help insulate thousands of homes.

“While Shell continues to bank billions, how many more households need to be forced into fuel poverty before the Government wakes up?

“Even the CEO of Shell has admitted that oil and gas companies should be taxed more to help protect vulnerable households.”

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