BP and Shell signal commitment to UK investment - weakening government case against windfall tax

BP and Shell have indicated they are committed to investing billions in Britain’s renewable energy despite calls for a windfall tax on their bumper profits — weakening the government’s claims that a levy could deter future funding.

After Shell reported nearly £7.3bn in first-quarter profits, chief executive Ben van Beurden said the company has a “very strong commitment” to investing in the UK if it makes “economic sense”.

Ed Miliband, Labour’s shadow climate change secretary, said it proved the government’s arguments against a windfall tax are “total nonsense”.

“The truth is that what’s happened over the last few months is that the government has put forward excuse after excuse, and each one of them has been comprehensively debunked,” he said.

Mr Van Beurden’s comments come after BP chief executive Bernard Looney said his company would continue with plans to invest up to £18bn in Britain this decade even if the government introduced a one-off levy.

Ministers have said a windfall tax could deter billions worth of investment, risking security of our energy supply, as well as almost 200,000 jobs that rely on the industry.

“Oil and gas companies in the North Sea are already subject to a tax rate on their profits that is more than double those paid by other businesses. To date, the sector has contributed more than £375bn in production taxes,” a spokesperson for the Treasury said.

Asked why the government continued to argue that a windfall tax would deter investment despite the comments from the two business chiefs, a spokesperson for the Treasury declined to comment.

Mr Miliband said BP’s stance was evidence that the government’s argument did not hold water and pointed to the fact that the company has said it would reward investors with a share buyback scheme thanks to the profits.

Green MP Caroline Lucas said she also didn’t “buy” the argument that if a windfall tax were levied that would mean that the investment wouldn’t happen, because these investment plans are long term plans that cannot be dependent on the short term whims of the market which right now are delivering these windfall profits.

BP has said it intends to invest up to £18bn in the UK’s energy system by the end of 2030, demonstrating BP’s “firm commitment” to the UK, and helping the country to deliver on its “bold ambitions” to boost energy security and reach net zero.

Shell has also announced that it aims to invest up to £25bn in the UK energy system of which more than 75 per cent is intended for low-carbon and renewable products and services, including offshore wind, hydrogen and electric mobility.

But Ms Lucas said in a sense it didn’t matter how much renewable energy is being generated from a climate perspective if at the same time companies are continuing to explore more new oil and gas reserves.

“Renewables have to replace fossil fuel,” she said. “Fossil fuels are what’s driving the climate emergency and that’s going to happen for as long as more and more oil and gas is being explored.”

In its road map to a net zero energy system by 2050, the International Energy Agency advised that there should be no new oil and gas fields beyond 2021.

Many green groups agree with opposition lawmakers’ perspectives.

"The government has tried to deflect calls for a windfall tax with this bogus idea that it will kill investment. It won’t,” said Tessa Khan, director of charity Uplift, a group that campaigns for “a just and fossil fuel free UK”. “Oil and gas companies are handing these excess profits to shareholders – this isn’t money they were going to invest, it’s spare cash.”