Shell boss says world in 'desperate need' of natural gas as it posts record profits
Shell more than doubled its annual profit to a record $39.9bn (£32.2bn) as the oil giant's boss declared the world would be “desperately in need” of fossil fuels for years to come.
The figure on Thursday was one of the highest profits ever posted by a British company, only eclipsed by Vodafone's £60bn in 2014 – following the sale of Verizon Wireless – and British American Tobacco's £38bn in 2017.
London-based Shell said annual profits more than doubled from $19.3bn after sales soared from $261.5bn to $381.3bn.
The figures included a profit of $9.8bn in the final three months of the year, following earnings of $30.5bn in the first nine months.
Roughly two thirds came from its gas business, including both production and trading, which sold 16.8 million tonnes of liquified natural gas in the quarter.
Wael Sawan, Shell's new chief executive, said the surge in gas prices in the wake of the Ukraine war demonstrated that supplies were still sorely needed across the globe, after Russia cut flows to Europe and western countries levied sanctions.
He told Bloomberg: “Our natural gas business continues to grow in a world that is desperately in need of natural gas at the moment, and I think for a long time to come.
“Gas has a critical role to play in the transition to lower-carbon energy.”
He warned that although mild weather had helped to reduce demand this winter, the energy crisis was far from finished, adding: “This is going to be a journey of years and I would caution anyone who looks ahead and assumes that the worst is over.”
The blowout results came after it was claimed the boss of BP is preparing to “dial back” the company’s push into clean energy, after rival oil giants in the US also posted record profits on the back of booming demand for fossil fuels.
Exxon Mobil and Chevron also revealed unprecedented profits for 2022.
However, on Thursday Shell came under fire for funnelling huge chunks of its earnings back to shareholders while investing significantly smaller sums in green energy.
It returned $26bn back to investors in 2022, including $18.4bn worth of share buybacks and $7.2bn of dividend payouts. For the first three months of 2023, Shell has announced further buybacks worth $4bn.
The $30bn of investor returns dwarfed the $21bn the company claims it is investing per year in renewables such as wind and solar power schemes – and even that figure is heavily disputed by environmental groups, because it is said to include money invested in natural gas.
In a complaint to US regulators, Global Witness alleged that the company's statements detailing investment in renewables amounted to “pure fiction” and “greenwashing”.
Ed Miliband, Labour’s shadow energy and climate change secretary, said Shell and its rivals were reaping “the windfalls of war” while failing to invest enough in green energy.
He told the BBC: “They [The Government] is incentivising investments in fossil fuels, not in renewables, and giving back massive windfalls to those companies [such as Shell] who are actually paying out far more in shareholder buybacks and dividends than they are actually investing in the low-carbon economy.”
But Shell's Mr Sawan called for “balanced” investment in both fossil fuels and renewables, arguing that cutting production of fossil fuels too quickly would trigger similar price swings in future to those seen in 2022.
He said: “We need to be able to deliver secure and affordable energy that is increasingly lower carbon, to be able to transition in a way to achieve the net zero emissions energy system that we all we all aspire to.
“Having said that, I think if 2022 has shown us anything, it is the reality of under-investing in a system, and the implications of that, as we've seen volatile energy prices last year, mainly in the gas arena. You can see how tightly balanced that market overall is.
“Our philosophy has been a real pivot towards energy transition investments... But we will make sure that those investments go into the areas where we can see line of sight towards attractive returns to be able to reward our shareholders.”
He said a faster switch to renewables would require “significant change” from governments and demand from the company’s customers. Mr Sawan added: “I do believe we are finding the right balance within our capital allocation.”
The vast sums paid to shareholders by big oil companies have triggered windfall taxes in the UK and Europe, as well as anger in the US over petrol prices – which depend on the price of oil.
Shell’s liability is likely to reach $900m in the UK, the company said. It paid $100m in tax last year and expects to pay $500m this year.
The company has warned that windfall taxes of the kind levied in the UK make countries less attractive for investment, because they reflect policy unpredictability.
Joe Biden, the US President, has accused the oil giants of “war profiteering” and argues they should be piling investment into ramping up production to ease pressure on drivers.