Shell says windfall tax could hit Green investments

Energy companies have been hit by short-term 25 per cent tax

Rishi Sunak has been warned that a windfall tax would cause long-term damage to the oil and gas industry. PA

Energy company Shell said that the UK’s windfall tax makes investment in North Sea oil and gas more uncertain.

The government's move aims to raise £5 billion a year and will last as long as energy prices remain high.

UK Chancellor Rishi Sunak announced the tax on Thursday as part of a £15bn package of measures to help people cope with the rising cost of living.

The measures will require energy companies to pay a temporary 25 per cent tax on profits and came with a promise that the firms can claim heavy tax relief if they invest in the UK — but only for investments in oil and gas.

The opposition Labour Party campaigned for a windfall tax on oil and gas companies to raise about £2bn while the chancellor said his tax grab would bring in more.

“In its current form, the levy creates uncertainty about the investment climate for North Sea oil and gas for the coming years,” said a Shell representative.

“Longer term, the proposed tax reliefs for investment don’t extend to the renewable energy system we want to drive forward in the UK and invest in very substantially.

“When making plans for the next decade and beyond, we need certainty.”

The government had previously said it was opposed to a windfall tax on energy suppliers because it would deter them from investing in new energy projects.

But that position has shifted as political pressure for action has mounted, with the highest inflation among G7 nations and rising bills pushing many household budgets to the limit.

Global gas prices soared last year when the reopening of world economies from pandemic lockdowns caused demand to rise and supply could not keep up. The war in Ukraine has pushed prices up even further in 2022.