Second oil major to report record 2022 profits

Major oil and gas giant, Shell is reporting record annual profit for 2022, after energy prices surged last year following Russia’s invasion of Ukraine.

Profits hit US$39.9 billion (£32.2 billion) in 2022, double last year’s total and the highest in its 115-year history. Energy firms have seen record earnings since oil and gas prices jumped following the invasion of Ukraine.

Yesterday, Our Today reported that American multinational oil and gas corporation, ExxonMobil posted record profits of US$55.7 billion (£45.2 billion) last year.

The White House in a statement said it was “outrageous that Exxon has posted a new record for Western oil company profits after the American people were forced to pay such high prices at the pump amidst [Russian President Vladimir] Putin’s invasion”.

Opposition parties calling for action

With these major oil companies posting super profits, pressure is mounting on them to pay more tax, as households struggle with rising bills. Opposition parties in Britain have said Shell’s profits were “outrageous”, citing that the Government is letting energy firms “off the hook”.

The parties have called for the planned increase in the energy price cap due in April to be scrapped. Energy prices had begun to climb after the end of COVID lockdowns but rose sharply in March last year after the events in Ukraine led to worries over supplies.

The price of Brent crude oil reached nearly US$128 a barrel following the invasion but has since fallen back to about US$83. Last year, the UK government introduced a windfall tax – called the Energy Profits Levy – on the “extraordinary” earnings of firms to help fund its scheme to lower gas and electricity bills.

Despite the move, Shell had said it did not expect to pay any UK tax this year as it is allowed to offset decommissioning costs and investments in UK projects against any UK profits. However, today Shell said was it due to pay $134 million in UK windfall tax for 2022, and expected to pay more than $500 million in 2023.

Critics to the levy

This may look small compared to its profits, but Shell only derives around five per cent of its revenue from the UK – the rest is made and taxed in other jurisdictions. However, critics point out that Shell is a UK-headquartered company and has been paying more to its shareholders than it spends on renewable investments.

The announcement of Shell’s super profits has increased pressure on Prime Minister Rishi Sunak and Chancellor of the Exchequer Jeremy Hunt to raise more money from oil and gas profits.

The UK Guardian is today reporting that a Downing Street official said they “absolutely” understand anger at the “extraordinary” profits but indicated there are no plans to increase the windfall tax.

The prime minister’s spokesman said questions about potential changes were “for the chancellor” when pressed by reporters. The government, the spokesman added without detailing specific measures, “is ready to take action” if falling wholesale energy costs aren’t reflected in lower prices at the petrol pump.

The annual profit figure far surpassed Shell’s previous record set in 2008. The company also said it had paid out US$6.3 billion to its shareholders in the final three months of 2022, and that it planned another US$4 billion share buyback.

Shell chief financial officer, Sinead Gorman noted the oil major had paid US$13 billion in taxes globally in 2022. It had also accounted for 11 per cent of liquefied natural gas shipments into the EU, easing pressure on supplies caused by sanctions on Russia.