Shell has announced £32 billion profits this year, the highest in its 115 year history, and BP is expected to report £22 billion. In fact, the world’s major oil companies are expected to reveal combined earnings of more than £5,000 per second this year – double what they made last year. How much of these profits will be invested in clean energy? And as demand for oil and gas reduces with the rollout of renewable wind and solar across the world, and the uptake of electric vehicles, will we see a fall in the production of oil and gas?

Profits from extracting oil and gas in the North Sea are subject to a 35% windfall tax, but companies can avoid paying 91p of every £1 of tax if it is reinvested in more oil and gas production in the North Sea. They can also set their investments and decommissioning costs against all UK tax. In recent years, such methods have meant that BP and Shell have paid almost no tax in the UK. BP and Shell both received more money back from the UK Government than they paid every year from 2015 to 2020 (except 2017, when Shell paid more than it received).

Added to which, the Government is licensing up to 100 new oil and gas fields in the North Sea with 115 applications for drilling licenses received from 76 companies. The decision to launch a licensing round follows the publication of the Government’s ‘Climate Compatibility Checkpoint’ that covers operational emissions from the production of the oil and gas but takes no account of the CO2 emitted when the oil and gas are burnt.

BP and Shell publicly endorse the need to act against climate breakdown, but they are still investing in new oil and gas extraction. According to the International Energy Agency, in 2022 only about 5% of oil and gas company capital expenditure went to wind, solar and other renewables. Shell paid more to its shareholders last year than it spent on renewable investments. In its Energy Outlook for 2023, BP claims that investment in oil and gas production will be needed for the next three decades and is looking to increase its oil and gas sales to developing countries. In 2023, BP plans to spend $7.5bn on oil and gas projects compared with a minimum of $3bn on low-carbon energy projects.

These low-carbon projects include carbon capture and storage, which is designed to allow the continued use of oil and gas while removing and burying the emissions. It is an expensive and energy-intensive process that has not been achieved at scale. BP is investing in blue and green hydrogen and biofuels, which risk creating new markets for oil and gas that will replace the markets that they are losing to renewables and electrification. For example, gas is used to make blue hydrogen, and hydrogen gas and hydrogen blended biofuels are being heavily promoted for home heating by the Hello Hydrogen and Future Ready Fuel industry marketing campaigns. As consumers and voters, we need to be well informed, discerning and vigilant that the smoke and mirrors surrounding some of the new technologies being promoted by the oil and gas industry do not fool us or our politicians.

Government policy so far has focused on reducing the demand for fossil fuels, but has not acted on restricting the supply of fossil fuels. We urgently need a clear timetable for scaling down oil and gas extraction year on year in the North Sea, beginning with halting new licenses. Denmark ended the licensing of new oil and gas fields in 2020. Meanwhile, taxing the profits of oil and gas companies could be used to accelerate the transition to the clean technologies of the future, retrain oil and gas workers, and improve the energy efficiency of the UK housing stock helping to lower energy bills.

It is essential that as we move away from using fossil fuels, their production falls. High profits must not be allowed to incentivise oil and gas companies to seek new markets for their oil

and gas, if we are to achieve the UK Government target of reducing our emissions by 68% by 2030 and stabilise our climate.