Will Shell And BP Use Their Mammoth Profits For Green
Energy?
BP and
Shell announced record annual profits of £23bn and £32bn
respectively for 2022.
BP and
Shell have pledged to spend £18bn and £25bn respectively over the
current decade on domestic low and zero-carbon energy projects.
Companies
need long-term confidence in the tax system to ensure the renewable
investment decisions they are making now are still viable five or
ten years later.
The mammoth profits of the world’s oil and gas giants will pass £200bn
when Saudi Aramco unveil their record results next month – with the
state-backed energy titan on course to post the most lucrative results
in the history of business.
Closer to home, BP and Shell unveiled their own mega earnings,
announcing record annual profits of £23bn and £32bn respectively,
fuelled by soaring fossil fuel prices and rebounding post-pandemic
demand last year.
When pressured over their bumper profits, the energy giants position
themselves as major players in the UK’s drive for energy independence
and for reaching its ambitious climate goals.
BP and Shell have pledged to spend £18bn and £25bn respectively over
the current decade on domestic energy projects, with an emphasis on
zero and low carbon energy developments.Skip
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The question is whether BP and Shell’s green spending matches those
aspirations.
The massive annual profits of the world’s energy giants are closing in
on £200bn
Energy giants wary
of windfall tax regime
BP has agreed deals to develop offshore wind in the Irish and North
Sea to power six million homes, alongside spending commitments for
blue and green hydrogen in Teeside and a £1bn pledge to ramp up
electric vehicle charging nationwide.
Shell is backing multiple UK-based offshore wind and blue hydrogen
schemes including 5GW of floating offshore wind turbines and a blue
hydrogen project with Uniper in the Humber region.
These future ambitions, however, seem poorly served by present day
spending.
BP is utilising around 30 per cent (£4.1bn) of its capital expenditure
worldwide for low carbon and renewable projects last year. It is
targeting 40 per cent of total spending to be on green energy projects
by 2025 and aim for it to be around 50 per cent – or £5.9bn to £7.5bn
– in 2030.
Shell is calculating it has spent £6.7bn – £8.4bn this year on
renewable projects this year worldwide.
To aggravate matters, BP has rowed back some of its key climate
pledges such as easing plans to slash the amount of oil and gas it
produces over the current decade to meet global demand.
Shell and ScottishPower have joined forces to develop the MarramWind
offshore wind farm, which could deliver up to 3 gigawatts of cleaner
renewable energy.
However, Andy Mayer, energy analyst at free market think tank, the
Institute of Economic Affairs, argued it was unfair to criticise BP
and Shell for their hesitancy to invest in an unstable market where
the regulatory regime has changed repeatedly in recent years.
“We currently have three supertaxes on the North Sea, the rates of
which have changed eight times in the last 21 years, including twice
in the last year.
“These are the tax and spending policies of banana republics not
stable investment regimes. They signal that investments made today can
be plundered tomorrow, whether in oil and gas, or wind farms,
hydrogen, and carbon capture,” he said.
Industry body Offshore Energies UK highlighted that as part of the
North Sea Transition Deal between the industry and government to
decarbonise the sector, fossil fuel producers have pledged to spend
£14-16bn in new energy technologies by the end of the decade.
Energy policy manager Will Webster argued this plan was being
undermined by the hiked windfall tax – now set at 35 per cent on top
of the 40 per cent special corporation tax rate.
He said: “There’s still a disconnect between the green energy future
government is working towards and the uncertain fiscal regime
implemented through initiatives like the Energy Profits Levy, which we
are working to address.
“Companies need long-term confidence in the tax system to ensure the
renewable investment decisions they are making now are still viable
five or ten years later, when the projects come to fruition.”
Show me the money:
Wait and see, say critics
Both Rishi Sunak and Jeremy Hunt in their time as Chancellor have seen
the industry as an opportunity to harness bumper North Sea profits to
boost support packages for households – when easing off levies and
backing companies during the transition from fossil fuels to
renewables could have been a more effective long-term method for
driving down bills.
Founder Mark van Baal explained: “If the bulk of your investments
remain tied to fossil fuels, and you even plan to increase those
investments, you cannot be Paris-aligned, because you will not achieve
large-scale emissions reductions by 2030.”
Companies that have been enriched by their fossil fuel legacy, and
continue to do so, have an obligation to do all that they can to help
deliver net zero. That requires transparency on levels of investment,
and accountability for a failure to transition as quickly as possible.
Darren Jones, Labour MP and chair of the BEIS Select Committee
Meanwhile, Heather Plumpton, policy analyst at environmental think
tank Green Alliance, argued that energy giants lack a long-term vision
to achieve their goals.
She said: “BP’s decision last week to scale back its climate goals and
spend far more on shareholder pay-outs than investments in renewables
are symptoms of chronic short-sightedness in the oil and gas industry.
Renewables are the cheapest form of energy and will dominate the
future energy system. If the oil and gas majors want to be part of
that system, they need an economic reality check.”
Darren Jones, Labour MP and chair of the highly influential BEIS
Select Committee, argued that renewable spending was the real litmus
test of BP and Shell’s commitment to renewables – with the numbers
exposing any excuses made by the energy giants.
He told City A.M.: “Companies that have been enriched by their
fossil fuel legacy, and continue to do so, have an obligation to do
all that they can to help deliver net zero. That requires transparency
on levels of investment, and accountability for a failure to
transition as quickly as possible.”
With BP and Shell so integral to the UK’s energy aspirations, it
remains to be seen whether they can rise to the challenge of boosting
the country’s green ambitions – which will be the only way to silence
their critics.
