Shell Posts Record Profits – Shareholders are big winners from the energy crisis

The reason for the unprecedented wave of profits is primarily the sharp rise in gas prices as a result of the Russian war of aggression in Ukraine. Shell is the world’s largest trader of LNG, the price of which has skyrocketed following the lack of Russian gas supplies.

The big winners of the oil and gas boom are the shareholders of the major corporations known as “Big Oil”. Shell wants to buy back around four billion dollars worth of its own shares in the coming months and increase the dividend by 15 percent. The company had already repurchased $19 billion worth of stock in the past 12 months.

Overall, Shell paid out around $26 billion to its shareholders in 2022. “We intend to remain disciplined while delivering compelling shareholder returns,” said new CEO Wael Sawan, who took over the helm at Shell earlier this year.

However, the record profits of the large energy companies also cause massive criticism. The environmental protection organization Greenpeace protested in front of Shell’s headquarters in London on Thursday morning and pointed out the outstanding compensation payments for environmental damage caused by the group.

Shell will pay a $900 million special tax

A UK court will soon decide whether Shell will have to pay damages to more than 11,000 residents in Nigeria’s Niger Delta for pollution in drinking water, air, fish and agriculture. Shell was instrumental in building the oil industry in Nigeria.

But there is also resentment on the political side. “No company should be making these kinds of outrageous profits from Putin’s illegal invasion of Ukraine,” said Ed Davey, leader of the British Liberal Democrats. He called on the Conservative government in London to further increase the special profit tax (windfall tax) for oil and gas companies. British Finance Minister Jeremy Hunt raised the special levy from 25 to 35 percent in the autumn and extended it until 2028.

The companies theoretically pay a total of 75 percent on profits from oil and gas production. In fact, Shell says it paid “only” $900 million in special taxes in the UK last year. Because only five percent of the group’s revenues are generated in Great Britain. In addition, the tax obligations can be reduced by new investments. Together with the taxes in the EU on special profits, the levies amount to 2.3 billion dollars for 2022.

“There are millions of people who cannot afford heat and electricity. And at the same time Shell is making record profits, wartime profits and the government is failing to levy a proper profit tax,” said Ed Miliband, environmental spokesman for Britain’s opposition Labor Party, speaking to the BBC.

Shell wants to merge fossil business into a new division

The political headwind is having an effect: Shell boss Sawan announced that he would review the investments of up to the equivalent of 28 billion euros planned in Great Britain over the next ten years in the light of the changed “investment climate”.

Overall, Shell invested around $25 billion in 2022, of which around $3.5 billion (14 percent) went into renewable energy and energy solutions. “Shell cannot claim to be in transition as long as fossil fuel investments dwarf renewable energy investments,” said Mark van Baal, founder of shareholder group Follow This.

Earlier this week, Sawan initiated a corporate restructuring. The gas business is to be combined with the oil division into an integrated “Gas and Upstream” division. Renewable Energy and Energy Solutions, which includes the group’s wind and solar projects, will be combined with Oil Refining and Marketing to form a new division (Downstream and Renewable Energy). The Shell boss wants to bring together all so-called “low carbon” businesses in one business area.

More: Profits of the oil multinationals could add up to 200 billion euros – and yet the boom is deceptive