Shell has warned it may back out of a pledge to invest £25bn in the UK energy sector after Chancellor Jeremy Hunt’s unexpected income tax hike last week.
David Bunch, chairman of Shell’s UK operations, has confirmed the energy giant will “evaluate” spending pledges covering 75 per cent of low-carbon and renewable projects and push for changes to an expanded Energy Profits Levy.
“We will have to evaluate each project separately. “When you pay more taxes, you’ll have less disposable income in your pocket, less to invest,” he said.
His comments are the latest blow to the UK’s ambitions to increase investment in the North Sea to boost the country’s security of supply and avoid blackouts this winter.
Harbor Energy said it was “reviewing” the impact of the tax on its UK operations and would hold talks with ministers and officials.
It is understood that Shell has not yet given up its £25bn commitment, but will look at the investment in any case.
Reached for comment, a Shell spokesman said the company acknowledged the “burden on society of rising prices” but that taxes should be designed to boost investment and raise incomes to support people.
Shell is now calling for a price freeze to recognize the reality of both lower and higher wholesale prices and an expanded capital buffer to include decarbonisation investments such as CCUS, hydrogen generation and wind generation.
The government raised the windfall tax in the third quarter of this year after another round of gains in the oil and gas sector.
The gains were driven by higher oil and gas prices, a surge in commodities after Russia’s aggression in Ukraine this year and a squeeze on supplies to Kremlin-backed Europe.
Last month, Shell reported a profit of 8.1 billion pounds ($9.45 billion) for the three-month trading window in the third quarter, with cash flow from operations of 10.76 billion pounds ($12.5 billion).