Supermajor Shell will be re-evaluating each project comprising its $30 billion (£25 billion) planned investment in the UK energy system after Britain raised the windfall tax on oil and gas producers and slapped a similar tax on low-cost electricity generators.
“We're going to have to evaluate each project on a case by case basis,” Shell’s UK Country Chair David Bunch said at the Confederation of British Industry's annual conference in Birmingham this week.
Earlier this year, Shell said it planned to invest £20-25 billion in the UK energy system over the next 10 years, with more than 75% of this intended for low and zero-carbon products and services, including offshore wind, hydrogen, carbon capture utilization and storage (CCUS), and electric mobility.
“When you tax more you're going to have less disposable income in your pocket, less to invest,” Shell’s top executive for the UK said this week, as carried by Reuters.
Last week, the UK raised the windfall tax on the profits of oil and gas operators in the North Sea while also expanding the tax to include low-cost electricity generators.
The UK has had a windfall tax on oil and gas firms operating in the North Sea since May, when the current Prime Minister Rishi Sunak, then Boris Johnson’s Chancellor of the Exchequer, announced a temporary 25% Energy Profits Levy for oil and gas companies, reflecting their extraordinary profits as oil and gas prices surged.
The UK is now raising the Energy Profits Levy by 10 percentage points to 35% from January 1, 2023, and is extending it to the end of March 2028, from December 31, 2025, as originally planned when the levy was 25%. The government is also introducing a new temporary 45% Electricity Generator Levy, which will be applied to the extraordinary returns being made by electricity generators.
Commenting on the tax hike, the leading industry body, Offshore Energies UK (OEUK), warned last week that the UK’s offshore industry would be “hit hard by the chancellor’s latest tax changes, which threaten to drive out investors, drive up imports and leave consumers increasingly exposed to global shortages.”
By Tsvetana Paraskova for Oilprice.com
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