Shell reacts to windfall tax hike saying it is being forced to review its £25bn UK investment plans
Shell will review its £25billion UK investment plans on a ‘case-by-case’ basis after the Government hiked its windfall tax on North Sea oil and gas producers.
David Bunch, the energy giant’s UK chairman, said it would be asking for ‘modifications’ to the policy.
Shell is among operators hit by an increase in the so-called energy profits levy (EPL) last week from 25 per cent to 35 per cent.
Windfall woes: Shell’s UK Executive Chairman David Bunch (pictured) wants to see changes to the Government’s energy profits levy
It was introduced at the lower level earlier this year to help pay for the Government’s energy bill package for consumers and bumped up in the Chancellor’s Autumn Statement last week after the scale of the multi-billion package widened.
Bunch told the Confederation of British Industry (CBI) annual conference: ‘We’re going to have to evaluate each project on a case-by-case basis going forward.’
He said some producers – those largely focused on the North Sea, unlike Shell which has a much bigger operation across the globe – would be more exposed than others.
The windfall tax comes on top of the higher levels of corporation tax that UK oil and gas producers already pay, taking the overall tax rate on those firms to 75 per cent.
It is expected to raise more than £40billion over five years. Bunch said he thought the tax was likely to discourage investment for some operators.
‘For an independent very much focused on the North Sea basin, it may chill the sector a little bit,’ he said.
Bunch said that while ‘nobody likes windfall taxes’, Shell understands ‘the role we play in society’ at a time when households – some of them supplied by the company’s domestic energy arm – struggle with bills.
‘Nobody should ever have to make the choice of whether they heat the house or eat,’ he said. ‘That’s just completely unacceptable.’
Bunch said the levy was ‘understandable’, and an allowance which means firms can cut the tax they pay if they invest was ‘helpful to a degree’.
That has meant Shell paying nothing this year though it expects to be hit with a bill for hundreds of millions of pounds in the future under the policy.
But Bunch added: ‘I would say this is the second windfall tax – windfall 2.0 – and unfortunately what it doesn’t have is a price condition [on crude oil or gas].
As we all know, things go down as well as up and the reality is, just like all of us, when you’re taxed more you’re going to have less disposable income in your pocket, less to invest.
‘We laid out a pathway of £25billion of investment which is, in fact, far more than the cash we generate in the UK.
‘We were investing back into green and low energy wind generation, electric charging, etc.
‘So it is a challenge and we will be working and consulting with the Government on hopefully a few modifications.’
Brindex, a trade body representing independent oil and gas firms, has already expressed dismay at the increase in the windfall tax, claiming it will deter investment and deepen the recession.