Oil and gas giant Shell has
reported lower annual profits due to energy prices falling last year.
Profits were $28.2billion (£22.3billion)
in 2023, down from $39.9billion in 2022 which was the company's highest earnings
in its 115-year history.
Energy firms made record earnings
when oil and gas prices soared in the aftermath of Russia's invasion of Ukraine
amid fears of supply problems.
Households’ bills have eased
since 2022, but remain at a high level.
The price of gas and electricity,
as well as petrol and diesel, first began to climb after the end of COVID lockdowns,
but surged in March 2022 after the outbreak of war in Ukraine due to concerns
over supplies.
The price of Brent crude oil
reached nearly $128 a barrel following the invasion, but has since fallen back
and is currently at about $80. Gas prices also spiked but have come down from
their highs.
The 2022 surge in prices led to
all energy companies, including the likes of Shell and BP, to make bumper
profits. In response, the government introduced a windfall tax - called the
Energy Profits Levy - on the "extraordinary" earnings of firms on their
UK operations to help fund a scheme to subsidise gas and electricity bills.
Shell confirmed it paid £178million
in UK windfall tax for 2022. A company spokeswoman said the company paid £1.1billion
in overall tax in the UK for 2023, of which £240million was taxed under the
Energy Profits Levy.
Meanwhile, Shell said it returned
$23billion to its shareholders in 2023, and was now increasing its dividend by four
per cent and beginning a $3.5billion share buyback programme over the next
three months.
Shell said the fall in profit
last year was a result of lower oil and gas prices as well as lower volumes
being traded and lower margins for refining, which is the process when crude
oil, the raw material extracted from the earth, is made into products such as
diesel.
It added 2023 saw higher
liquefied natural gas (LNG) trading. Many European countries turned to LNG as
an alternative source of energy after Russia cut its supplies of natural gas to
continent.
As a result, the British company
posted profits of $7.3billion in the final three months of 2023, which exceeded
analysts' expectations but was down from a record $9.8billion in the same
period the year before.
Jamie Maddock, energy analyst at
wealth management business Quilter Cheviot, said Shell's strong results were
driven by its gas division.
He warned that oil and gas prices
were likely to remain "unpredictable" in 2024 with geopolitical
tensions remaining high in the Middle East.
"It is these sorts of
environments that energy giants can thrive in, as we saw in 2022, so it
wouldn't be a shock to see Shell continuing to deliver over the course of the
year," he added.
Jonathan Noronha-Gant, senior
campaigner at Global Witness, Senior Campaigner, accused Shell of
"choosing climate-wrecking U-turns and shareholder pay-outs" as a
result of its strong profits, rather than "investing in clean
energy".
Shell's Chief Executive, Wael
Sawan, said the company this year would continue to "simplify our
organisation with a focus on delivering more value with less-emissions".
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