Shell’s shareholder pay-outs could cover the energy bills of 6.3 million UK households in fuel poverty – and then some

As fossil fuel major Shell has once again announced obscene profits and shareholder pay-outs, the UK government has issued a new round of oil and gas licences. This time, the company has topped the tables for the number of new awards.

Of course, the news comes as winter looms and UK households brace for another cold season with extortionate energy bills – of which Shell’s profits could pay for around seven million households’ worth.

Shell’s staggering profits and shareholder pay-outs

On Thursday 2 November, Shell published its third quarter profits.

The fossil fuel giant posted profits of £5.1bn. This adds to its near £11.6bn already this year alone, taking its total to £16.7bn. Meanwhile, the company declared shareholder distributions of £4bn. Again, it builds on £9.3bn announced in the first half of 2023. It took its total shareholder pay-outs to over £13bn.

Naturally, Shell’s announcement comes at a time when the UK is reeling from the devastating impacts of Storm Babet and in the grip of Storm Ciaran. Of course, scientists have linked the climate crisis to the increased frequency and severity of autumn and winter storms in the UK.

Accounting company PwC has estimated the insurance costs of Storm Babet for residential and commercial properties at anywhere between £450-650m. Therefore, just the shareholder pay-outs Shell made this quarter alone could pay for this damage at minimum, six times over.

Fuel poverty versus fossil fuel riches

To make matters worse, while Shell’s profits pile up, UK electricity and gas prices remain sky high. Shell’s staggering figures stand out once more against the backdrop of soaring energy bills. UK households face another winter of exorbitant energy costs. Analyst Cornwall Insight has estimated that average energy bills will rise by 3.5% in January.

Already, the average household energy bills between October and December will be 50% higher than in winter 2021/22. Compounding this, the Tories have dropped financial support available to households. Specifically, the government has scrapped the Energy Bill Support Scheme – a £400 winter discount on energy bills it implemented last year.

Shell’s shareholder dividends for 2023 so far equate to more than the cost of financing this in full. What’s more, it would still leave plenty left over to cover all 1.6m people the Canary’s Steve Topple calculated the government has left out of this year’s cost of living payments.

Alternatively, its dividends for 2023’s first three quarters could pay the average energy bills of over seven million homes. This is more than a quarter of all UK households, and over the 6.3 million households non-profit National Energy Action has estimated rising costs will push into fuel poverty this winter.

New oil and gas licences

So, in the same week the company announced booming profits, it also took the lion’s share of new oil and gas licences.

On Monday 30 October, the UK government issued its first tranche of new offshore oil and gas licences. These are part of over a hundred the government previously announced in July that it plans to greenlight for this round of licensing.

In all, it announced 27 new licences, spanning 64 blocks. Shell won the most – with 11 licences across 28 blocks. The majority of these are exploration licences, alongside two for developing wells. In addition, Shell has also obtained one licence it will merge with another it already holds.

The total size of these blocks together equates to over 5,500km². Of this, Shell’s blocks cover some 3,500km² – over 17 times the size of Equinor’s climate-wrecking Rosebank blocks. However, since these are primarily exploration licences, the amount of oil and gas contained in the new areas is yet to be determined. It means that not all these blocks will necessarily lead to production.

Even so, the sheer scale of the newly licensed area for oil and gas exploration flies in the face of international climate targets. The International Energy Agency (IEA) had previously warned that the world should develop no new oil, gas, or coal projects past 2021 if it plans to meet net zero by 2050. Given this, its latest licensing round drives another nail in the coffin global decarbonisation goals.

Windfalls for fossil fuel majors

Of course, Shell’s new oil and gas licences will bring in further profits for the energy major. Crucially however, it’ll also help to reduce its tax bill too.

Specifically, the company will benefit from a key loophole in the Energy Profits Levy – otherwise known as the windfall tax on oil and gas. Ostensibly, the government implemented the windfall tax to claw back fossil fuel majors’ outsized profits. Moreover, the government suggested that the revenues would be used to fund measures to address the cost of living crisis.

When the Tories introduced the windfall tax, it inserted a clause called the “investment allowance”. This stipulates that companies that invest in the UK’s North Sea oil and gas can claim tax relief on these investments. Essentially then, they evade paying the full windfall tax. It’s part of the Tories’ drive for increasing UK oil and gas to shore up its domestic energy security.

As plenty have pointed out however, this is bogus. This is particularly the case since UK offshore oil and gas does not automatically supply UK demand. Instead, like all oil and gas, it goes on the international market. On top of this, a recent Uplift analysis highlighted that during the last six licensing rounds since the Tories took power in 2010, new blocks have produced just 16 days worth of gas.

Notably, the windfall loophole means that for every £1 a company spends on new oil and gas, the government will provide tax relief of 91p. Given this, its new haul of North Sea oil and gas licences will help the company lower its windfall bill. Naturally then, Shell has also ditched its decarbonisation plans and ramped up oil and gas production this year.

Cozy relationships, freezing homes

A new investigation by Desmog in October found that the oil and gas industry had engaged in an intense lobby campaign to weaken the windfall tax. Predictably, Shell was among the North Sea fossil fuel players involved. It did so partly through trade body Offshore Energies UK (OEUK), alongside direct meetings with ministers. Crucially, the outlet noted that:

The new research indicates this ‘loophole’ came about following a surge in meetings and lobbying between OEUK and its member companies with the government

Of course, this cozy relationship is nothing new. It is a by-product of fossil fuel finances flowing into Tory pockets. As Shell comes out on top, it’s worth remembering the fossil fuel major boasts significant ties to politicians in high places. Most notably, Shell is a top client with prime minister Rishi Sunak’s father-in-law’s firm Infosys.

In short, climate-fuelled storms have wrought destruction, while oil and gas prices have sent household energy bills through the roof. Yet, at the same time, the Tories have gifted Shell new licences and a tax break, as its profits swell.

It’s Tories’ class war 101. They couldn’t give a crap about people facing exorbitant energy bills, or communities losing homes and livelihoods to extreme climate-intensified weather. As the poorest UK households face one crisis after another, polluters should pay up. Instead, in Tory-wrecked UK, the fossil fuel industry gets a free pass to make an unconscionable fortune, while millions suffer.

Feature image via Will Lane/Wikimedia, cropped and resized to 1910 by 1000, licensed under CC BY-SA 3.0