Shell to evaluate £25b UK investments on windfall tax

SHELL will “evaluate” its plan for as much as £25 billion ($40.9 billion) of UK investments and push for changes to the expanded windfall tax announced by the government last week.

“We’re going to have to evaluate each project on a case by case basis,” said David Bunch, chairman of Shell’s UK operations. “When you tax more you’re going to have less disposable income in your pocket, less to invest.”

Speaking at the CBI conference in Birmingham on Monday (Nov 21), Bunch complained that there was no mechanism to adjust the levy if there are changes in oil and gas prices. It would be helpful if such a condition was added to the tax proposal, he said.

In an effort to shore up the public finances, Chancellor of the Exchequer Jeremy Hunt announced last week the second tax raid on the UK oil and gas industry this year. The Energy Profits Levy introduced in May was increased to 35 per cent from 25 per cent and extended to 2028, raising as much as £19 billion. Producers of renewable, nuclear and biomass energy were also hit with a new 45 per cent windfall tax.

Shell announced its UK spending plans earlier this year, saying it would invest in new oil and gas fields as well as offshore wind and hydrogen.

“We laid out the pathway for £25 billion of investment, which is in fact, to put it into context, far more than the cash that we generate in the UK,” Bunch said.

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Shell said last month that it didn’t pay the UK windfall tax in the third quarter, despite reporting a global profit of US$9.45 billion. That was because it had made large investments in the country that could be offset against the levy. It expects to start paying the tax next year.

Bunch said in an interview with Bloomberg TV that new assistance for British businesses should be done in a targeted way that supports those that are most in need. The company itself isn’t benefiting from the support and won’t in the future.

“Shell UK won’t be accepting any of that support. We haven’t accepted that support and we will not accept that support going forward,” he said. BLOOMBERG