Shell (NYSE:SHEL) will "evaluate" its plan to spend as much as £25B in U.K. operations over the next decade following the government's decision to increase a windfall tax on oil and gas producers, David Bunch, chairman of the company's U.K. business, said Monday.
"When you tax more you're going to have less disposable income in your pocket, less to invest," Bunch said in reaction to finance minister Jeremy Hunt's announcement last week to raise the U.K.'s windfall tax on North Sea producers to 35% from 25% to help plug a big hole in the government's budget, bringing total taxes on the sector to 75%, among the highest in the world.
The U.K. forecasts the tax, which was extended from year-end 2025 to 2028, will raise £40B.
Bunch told the CBI conference in Birmingham that there was no mechanism to adjust the levy if oil and gas prices fall sharply, which also should include investments in wind generation, hydrogen and carbon capture technology.
Shell (SHEL) said last month it did not pay the U.K. windfall tax in Q3 despite reporting a $9.45B in global profit, the company's second highest quarterly profit on record, as it had made large investments that could be offset against the tax; the company expects to start paying the tax next year.
CEO Ben van Beurden said at the time that Shell (SHEL) must "embrace" the "societal reality" that companies benefiting from higher energy prices would be asked to help offset soaring costs for consumers.