Windfall tax threatens oil and gas investment in North Sea, says Shell

The energy giant has said the levy “creates uncertainty”

Big Zero Report 2022

The implementation of the new windfall tax creates uncertainty over future investment, Shell has said.

In its recent set of cost-of-living measures, the government included a windfall tax on energy firms that could potentially raise around £5 billion.

Energy companies will have to pay an additional 25% Energy Profits Levy for the next 12 months, the Chancellor said.

A Shell spokesperson said: “We understand the worry for millions of people about how high energy costs are challenging their household budgets – and the need for support to help make ends meet.

“But at the same time, we must sustain investment in securing supplies of oil and gas the UK needs today, while allocating future spend for the low carbon energies we want to build for the future.

“However, in its current form, the levy creates uncertainty about the investment climate for North Sea oil and gas for the coming years.

“And longer term, the proposed tax reliefs for investment don’t extend to renewable energy system we want to drive forward in the UK and invest in very substantially. When making plans for the next decade and beyond, we need certainty.”

The company’s quarterly financial report showed that Shell almost tripled its profits in the first quarter of 2022.

The energy company made $9.13 billion (£7.3bn) in the first three months of the year.

A government spokesperson told ELN: “As set out in the British Energy Security Strategy and with Putin’s invasion of Ukraine illustrating the merit of this, North Sea oil and gas are going to be crucial to the UK’s domestic energy supply and security for the foreseeable future – so it is right we continue to encourage investment there.

“The levy’s investment allowance means businesses will overall get a 91p tax saving for every £1 they invest and allows for investment in activities to cut emissions, which could include electrification.

“In addition, there are already numerous generous incentives available to bolster investment in renewable energy, including the super-deduction, the UK’s competitive R&D tax relief regime and the Contracts for Difference scheme – making sure the UK continues to invest in clean energy too.”

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