Shell’s blockbuster profits face backlash in its own backyard

Shell posted a record profit of US$39.87 billion, leading to criticism from British politicians, unions and policy analysts. PHOTO: AFP

LONDON – Shell Plc’s blockbuster earnings last year are triggering the ire of British politicians, unions and policy analysts, who say they’re outraged the oil major made so much money while customers struggled through a cost-of-living crisis driven partly by soaring energy prices.

The criticism raises the stakes for Shell in its home market as the company decides how to pursue investments that will boost the traditional fossil-fuel business along with lower-carbon options. With the Labour Party leading opinion polls heading into the next general election, the British company may become a campaign issue and eventually face higher windfall taxes as it sends more profits to shareholders.

“Bill payers will be rightly appalled to hear that oil giants like Shell are still seeing sky-high profits,” said Dr George Dibb, head of the Centre for Economic Justice at the Institute for Public Policy Research, a left-leaning think tank. “The sheer scale of that transfer of wealth – from bill payers to shareholders – is inexcusable and demands action from the government.”

Shell posted a record profit of US$39.87 billion (S$52.35 billion) for the full year and said it will use some of that cash for US$4 billion of share buybacks plus a 15 per cent dividend hike. The earnings are the latest evidence of a blowout year for Big Oil, with Exxon Mobil also reporting a record annual profit.

“As the British people face an energy price hike of 40 per cent in April, the government is letting the fossil-fuel companies making bumper profits off the hook with their refusal to implement a proper windfall tax,” said Mr Ed Miliband, Labour’s shadow climate change and net zero secretary. “It is only right that the companies making unexpected windfall profits from the proceeds of war pay their fair share.”

Last year, Shell said it would evaluate plans to spend £25 billion (S$40.6 billion) in Britain and then launched a strategic review of its business selling power and gas to British homes.

“The review was triggered, of course, by concerns on just the underlying stability in the investment climate,” Chief Executive Officer Wael Sawan said on a call with reporters on Thursday. “We’ve been trying to focus on where we can invest with confidence.”

Shell paid US$100 million of windfall tax in the UK last year and expects that to reach US$500 million in 2023, Chief Financial Officer Sinead Gorman said. Still, there are calls for the government to do more to help fund pay increases for public service workers, who have been going on strike in recent months seeking higher wages.

“These obscene profits are an insult to working families,” said Mr Paul Nowak, general secretary of the Trades Union Congress. “Instead of holding down the pay of paramedics, teachers, firefighters and millions of other hard-pressed public servants, ministers should be making Big Oil and Gas pay their fair share.”

Separately, Shell has been accused of misleading investors over its renewable energy spending plans in a complaint filed with the US securities regulator by activist group Global Witness.

Like other leading European energy companies, Shell is aiming for rapid expansion of its low-carbon and renewables business as part of efforts to reduce greenhouse gas emissions over the coming decades.

In Wednesday’s complaint to the Securities and Exchange Commission (SEC), Global Witness said it was “concerned that Shell has materially misstated its financial commitment to renewable sources of energy by inflating” its spending in that area.

Shell said in February 2021 that it aims to spend between US$2 billion and US$3 billion a year on renewables and energy solutions.

Shell’s spending on the division, which includes renewables, carbon capture and offsets as well as hydrogen and retail gas and power sales, amounted to US$2.4 billion in 2021, its annual report said. That equated to 12 per cent of the company’s total spending.

Global Witness said that its own calculations showed Shell spent only 1.5 per cent, or US$288 million, of its total spending of US$20 billion on renewable energy sources such as wind and solar.

Shell rejected the accusations, saying it is “confident that its financial disclosures are fully compliant with all SEC and other reporting requirements”.

The complaint also requested that the SEC examine whether the inclusion of gas trading in Shell’s renewables and energy solutions division “constitutes a materially misleading misstatement”.

Shell accelerated its investments in renewables in 2022 with the US$1.55 billion acquisition of India-based Sprng and an agreement to buy Danish renewable natural gas company Nature Energy for US$2 billion. BLOOMBERG, REUTERS

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