Shell reports highest profits in 115 years

Oil and gas giant Shell has reported record annual profits after energy prices surged last year following Russia’s invasion of Ukraine.

Profits hit $39.9bn (£32.2bn) in 2022, double last year’s total and the highest in its 115-year history.

Energy firms have been making record profits after oil and gas prices jumped following the invasion of Ukraine.

It has heaped pressure on firms to pay windfall taxes as households struggle with rising bills.

Last year, the UK government introduced a windfall tax – called the Energy Profits Levy – on the profits of firms to help fund its scheme to lower gas and electricity bills.

Oil and gas prices had begun to rise after the end of Covid lockdowns but rose sharply in March last year after the events in Ukraine led to worries over supplies.

It led to to bumper profits for energy companies, but also fuelled a rise in energy bills for households and businesses. Along with rising food prices it has pushed inflation – the rate at which prices rise – to a 40-year high.

Despite the government’s windfall tax, Shell previously 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.

But the BBC understands that it will now say that it has paid some tax in 2022 and expects to pay hundreds of millions in UK tax in 2023.

These numbers look small compared to its profits but Shell only derives around 5% of its revenue from the UK – the rest is made and taxed in other jurisdictions.

This is unlikely to satisfy those who think that a UK headquartered company which has set a new record for corporate profits should be paying more, and those who will notice that Shell paid more to its shareholders than it spent on renewable investments.

The government is limiting gas and electricity bills meaning that a household using a typical amount of energy will pay £2,500 a year, although this is due to rise to £3,000 in April.

However, that is still more than twice what it was before Russia’s invasion.

In May, the government introduced its windfall tax on the profits made from extracting UK oil and gas. The rate was originally set at 25%, but it was increased to 35% in November.

Earlier this year, Shell said it would pay tax in the UK for the first time since 2017 as a result of the new windfall tax.

Shell chief executive Wael Sawan said the firm’s latest results “demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world”.

But Labour’s shadow climate change secretary Ed Miliband said: “As the British people face an energy price hike of 40% in April, the government is letting the fossil fuel companies making bumper profits off the hook with their refusal to implement a proper windfall tax.

“Labour would stop the energy price cap going up in April, because it is only right that the companies making unexpected windfall profits from the proceeds of war pay their fair share.”