Approval of a single, new North Sea gas field, Jackdaw, will result in Shell paying over £200m less in windfall tax thanks to a deliberate loophole in last week’s announcement by the Chancellor.
Tax shortfall means the public purse will have to cover the £400 energy bill relief for half a million households. The subsidy means the public will, effectively, be paying for Jackdaw’s gas twice.
Jackdaw’s gas reserves will not lower energy bills or stop the UK from needing to import gas.
UK taxpayers are set to lose out on over £200 million in windfall tax due to the government approving just a single, new North Sea gas field according to analysis of Rystad Energy data by the campaign group Uplift. The Jackdaw gas field, however, will not lead to lower energy bills and will do next to nothing for UK energy security.
The Chancellor’s windfall tax, announced last week, included a deliberate loophole for oil and gas companies that invest in the North Sea. The loophole means that whatever a company spends opening up a new North Sea field, almost as much will be discounted form their windfall tax bill.
This subsidy means that Shell, which owns Jackdaw, will pay £210 million less in windfall tax. As a result of this shortfall, the public purse is going to have to cover the recently announced £400 energy bill discount for half a million UK households. Shell recorded profits of over £14 billion in 2021. Shell has paid minimal or negative tax in the UK in recent years.(1)
Jackdaw’s gas reserves will not however lead to lower energy bills, a fact ministers have conceded (2), and will do next to nothing for UK energy security. Jackdaw’s gas is only enough to meet around 1- 2% of UK gas demand on average over its short lifetime. (3)
Tessa Khan, director of Uplift said: “Jackdaw’s approval means the public is now losing money to Shell. We are forgoing £200 million for almost no public gain: these reserves are a fraction of UK demand and so do very little for energy security, and will do nothing to reduce soaring energy bills. It means that we’ll effectively be paying for this gas twice: once in this huge subsidy to Shell to develop Jackdaw and again when it’s drilled and sold back to us. Jackdaw’s gas belongs to Shell and it can charge us what it likes for it. How does the Chancellor think this solves the UK’s energy crisis? The truth is it doesn’t; it makes it worse.”
"The government must reverse this decision. They know, as well as anyone, that there can be no new oil and gas fields if we’re to maintain a liveable climate. Jackdaw’s gas reserves solve nothing, they only make the climate crisis worse. We need an energy strategy from this government that puts the public’s needs for an affordable, clean energy supply over Shell’s need to profit, which means a rapid acceleration of renewable energy and a massive energy efficiency programme. This is the only way we’re going to ensure people can afford to stay warm this winter and next, while not setting fire to our only home.”
Joanna Warrington from Fossil Free London said “Shell has recently relocated to London because they knew they’d get an easy ride from this sycophantic government. After a record breaking first quarter’s profits, not only have they been handed huge tax breaks from new drilling under the bonkers windfall tax, but they are now having Jackdaw’s climate destruction rubber stamped by Kwasi Kwarteng. But the people of London will resist Shell and their destructive extraction at every turn, our futures depend on it.”
Jackdaw’s gas reserves are particularly polluting, with an unusually high CO2 content. Shell’s application to extract gas from Jackdaw was originally rejected by the regulator, OPRED, due to what it described as the “significant effect” it would have on the climate. OPRED has now attached conditions to Shell’s approved plans to mitigate its climate impact. However, it may still mean that Shell’s plans for Jackdaw do not align with the targets and objectives of the UK’s Carbon Budgets nor the industry’s decarbonisation commitments in the North Sea Transition Deal.
Notes to editors
(1) In 2020, the UK was the only country where Shell operated that it didn’t pay any tax. In fact, it collected almost £100m from the UK government. Last year, as gas prices hit record highs, Shell again received more – about £90m more – than it gave back to the UK.
(2) Jackdaw’s gas reserves will have no impact on UK energy bills. The price of North Sea oil and gas is set by changes in gas supply and demand around the world, which is unaffected by any comparatively minor increase in production here.
(3) Jackdaw is a relatively minor gas field and will not prevent the UK from needing to import gas. Its output will only meet around 1- 2% of UK gas demand on average over its lifetime. It would start producing gas in 2025 and production would drop by almost 60% within four years of its peak in 2026.
Image credit: John S Lewis via Climate Visuals