Shell underlines value of North Sea after profits hit 14-year high
SHELL chief executive Ben van Beurden has underlined the value of the North Sea’s oil and gas resources amid the energy crisis as he insisted a windfall tax could jeopardise investment in the area.
Calls for the Chancellor, Rishi Sunak, to impose an additional charge on oil firms’ profits intensified yesterday after Shell posted its highest quarterly earnings for 14 years.
Shell grew first quarter profits to $9.1 billion (£7.3bn) from $3.2bn as it felt the benefit of the surge in oil and gas prices that has left consumers facing huge increases in their energy bills.
Mr van Beurden said he was “acutely aware” of the difficulties that high energy prices were causing for many people. He said Shell was trying to help in the short term by providing payments holidays and the like for some customers of its retail supply business.
But the Dutch executive said the company could make the most effective contribution by providing “more and cleaner” energy solutions.
While Shell is investing heavily in renewables, it expects demand for oil and gas will remain strong for years.
Noting that commodity prices have risen on international markets amid the fallout from the Ukraine war following years of limited investment in oil and gas developments, Mr van Beurden accepted that increasing North Sea production would not have a big impact on that dynamic.
However, he told reporters: “If you do invest in the North Sea you do help those global dynamics and the North Sea is a very good basin with a lot of oil and gas left and a very supportive and conducive policy framework.”
Mr van Beurden said increases in UK production could help reduce the country’s reliance on imports relatively quickly in a way that would generate benefits in terms of energy security, the balance of payments and the “climate change perspective”.
Industry leaders have noted that imports may entail higher emissions than the use of domestic production.
“There are lots of opportunities that have near term development potential. It’s not as if the next investment in the North Sea would take 10 years to start producing oil and gas,” said Mr van Beurden.
He said Shell is working hard to get approval for its plans to develop the giant Jackdaw gas field east of Aberdeen, while progressing major projects such as the redevelopment of the Penguins field East of Shetland.
But new chief financial officer Sinead Gorman said there had been no change in Shell’s position regarding the proposed Cambo field West of Shetland. Following opposition from environmentalists, Shell put plans for the development on hold in December citing economic factors and the potential for delays.
Mr van Beurden said Shell plans to invest up to £25bn in the UK in the next decade. The bulk of the investment will be in low and no carbon energy sources.
Regarding a potential windfall tax, Mr van Beurden noted: “If you talk about these types of investment levels, they do require a stable and predictable financial outlook, it does require stability of policy and everything else.”
Mr van Beurden highlighted the potential for markets to remain volatile amid uncertainty about the impact of the war in Ukraine and other factors.
Shell made the decision to withdraw from Russia shortly after the country launched its attack on Ukraine. Mr van Beurden said Shell is making progress with efforts to dispose of its interests in Russia. The group booked a $3.9bn first quarter charge related to the phased withdrawal from Russian oil and gas activities.
Shell has bought back $4bn shares in the year to date, out of an expected first half total of $8.5bn. It declared a first quarter dividend of 25 cents (20p) per share, up four per cent on the preceding quarter. Shell shares closed up 68p at 2293p.
BP made a $6.2bn underlying first quarter profit, against $2.6bn last time.