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British Oil’s record profits outweigh renewables investment

Instead of investing in renewable alternatives, British oil companies have doubled down on business as usual.

By Polly Bindman

As households continue to struggle with their gas and electricity bills, energy companies continue to report record profits. This week, Centrica, which owns British Gas, posted £3.3bn profits for 2022. For comparison, its 2021 profits were £948m – though British Gas itself saw profits fall by 39 per cent.

Centrica’s announcement followed similarly record-breaking news from British oil giant BP, which last week announced profits of £22.4bn for 2022, the largest annual figure in the company’s hundred-year history. Only days earlier, Shell announced its own record-breaking yearly earnings of £32bn.

But despite these major windfalls, according to a February analysis of BP and Shell’s results by think tank Common Wealth, in 2022 BP spent more than 14 times as much on shareholder payouts (which includes dividends and share buybacks) than on the low-carbon investments crucial to energy security and the net zero transition. Shell’s distribution to shareholders was 7.5 times higher than its total investments in “renewables and energy solutions”, which accounted for roughly 14 percent of its total capital expenditures.

[See also: Centrica and Shell profits show where the real money is being made]


While these are the figures that Shell itself reported, a recent investigation by Global Witness claims that Shell’s actual spending on renewables is also even lower, closer to 1.5 percent of the company’s total annual spending. In response to these claims, Shell told Global Witness it is "confident that its financial disclosures are fully compliant with all SEC and other reporting requirements”, while confirming that gas-related activities fall under its definition of "renewables and energy solutions".

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“What’s critical about these results is not just the extraordinary scale of profits, but how BP is using them… Rather than pivoting toward a clean energy future, these results once again show BP doubling down on fossil fuel investment for the long term,” Adrienne Buller, Common Wealth’s director of research, said of BP’s earnings. 


Following the publication of their results this February, both Shell and BP signalled to the market that they are unlikely to pivot away from oil and gas any time soon. Despite pledging to increase annual spending on renewables and low carbon energy by $1bn, last week BP announced that it was scaling back its oil and gas reduction target from 35-40 percent by 2030 to 20-30 percent within the same timeframe. 

When asked whether Shell would accept lower returns on renewables than from oil and gas investments last week, recently appointed CEO Wael Sawan responded that the company “cannot justify going for a low return… If we cannot achieve double-digit returns in a business, we need to question very hard whether we should continue in that business”.

Given that, as Sawan says, the central remit of for-profit companies is to maximise returns, and oil and gas firms believe renewables offer a less attractive returns profile than oil and gas, it may be many years yet before Shell and BP fully embrace renewables voluntarily. 

Moreover, despite these profits, Shell’s annual results show the company paid just £108m in windfall taxes on its North Sea earnings last year, leading to calls for a tougher tax rate. In response, Prime Minister Rishi Sunak argued that the existing levy “strikes a balance between funding cost-of-living support while encouraging investment in order to bolster the UK’s energy security”.

A separate report published last year by Common Wealth advocates for a British publicly owned generation company. It argues that rather than “relying on incentivising and nudging private market activity to meet our goals, a public company would allow us to deliver on specific, ambitious clean energy targets, taking advantage of the state’s unrivalled ability to plan for the long-term”.

The report points out that compared with other European countries, Britain is "almost uniquely" lacking in a national green energy champion like Denmark's Ørsted, which is 51 per cent state-owned and a "world leader in offshore wind". 

Unlike the current strategy of oil majors, which involves re-directing profits from fossil fuels back towards shareholders, such a move could ensure that Britain tackles both its climate and energy crises together, with British taxpayers able to reap the benefits. 

Read more:

Why Rishi Sunak is complicit in Shell’s “greenwashed” mega-profits

Where have BP’s Russian profits gone?

Running on fumes: how Britain squandered its gas wealth

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