Weekly News Review - 31st July 2023
Shell profits hit as oil and gas prices fall
Oil giant Shell has announced second quarter profits of just over $5bn (£3.9bn), a drop of more than 50% from the $11.5bn seen in the second quarter of 2022 due to the fall in oil and gas prices over recent months. Despite the decrease in profits Shell confirmed they would still be rewarding shareholders with a further share buyback and hike to its dividend.
The 2023 profits were broadly in line with the $5.5bn recorded for the second quarter of 2021, before the energy crisis caused a rise in oil and gas prices. The Russian invasion of Ukraine further exacerbated energy prices leading to record profits in 2022. Shell blamed falling oil and gas prices in recent months for the profit slump as well as its lower volumes of fossil fuel production. The company said its trading arm was also less profitable.
Shell Chief Executive Wael Sawan said: “Shell delivered strong operational performance and cash flows in the second quarter, despite a lower commodity price environment. Today we are delivering on our Capital Markets Day commitment of a 15% dividend increase.”
“We are going further on our buyback guidance by commencing a $3bn programme for the next three months and, subject to board approval, at least $2.5bn at the Q3 2023 results. As we deliver more value with less emissions, we will continue to prioritise share buybacks, given the value that our shares represent.”
However, the $5.1bn second quarter profits have been criticised by environmental campaigners who claim that the company is not doing enough to tackle climate change. Sawan last month laid out a plan for Shell to cut costs, boost shareholder pay-outs and devote a higher proportion of spending to oil and gas. Shell have also softened emission reductions targets in recent months and reduced investment in renewables.
George Dibb, the head of the Centre for Economic Justice at the think-tank IPPR, said: “It continues to make huge amounts of money off the back of the war in Ukraine and high energy prices. Meanwhile, incredibly, Shell is now paying more out to its shareholders in dividends and buybacks than it makes in profit, clearly prioritising these transfers over investing a net zero future.”
Scottish government approval for £500m hydro scheme
The Scottish government has approved plans by Drax to build a £500m pumped hydro storage plant at its existing Cruachan facility near Oban. Drax says the project would support 1,000 jobs during its construction and could be operational by 2030. The 600MW plant would strengthen UK energy security with flexible generation while enabling more wind power to come online.
Will Gardiner, Drax Group CEO, said: “This is a major milestone in Drax’s plans to build Britain’s first new pumped storage hydro plant in a generation. These plants play a critical role in stabilising the electricity system, helping to balance supply and demand through storing excess power from the national grid.”
“When Scotland’s wind turbines are generating more power than we need, Cruachan steps in to store the renewable electricity so it doesn’t go to waste. With the right support from the UK Government, Drax will invest £500m to more than double Cruachan’s generating capacity and support almost 1,000 jobs across the supply chain during construction.”
First Minister of Scotland, Humza Yousaf, visited the Cruachan site on Tuesday where he confirmed support from the Scottish government. However, he outlined that before it can go ahead, the project needs new UK government policy that would support private investment. Developers of pumped storage hydro schemes argue that the current UK energy market does not have the mechanisms to make such major projects attractive to investors.
Mr Yousaf, said: “Hydro power has real potential to play a greater role in our transition to net zero and to help ensure a resilient and secure electricity supply across the UK. The expansion of Cruachan will help to strengthen our energy security by providing much-needed resilience in the system, supporting hundreds of jobs and providing a real boost to the Scottish economy.”
“However, we know that there remain a number of challenges in developing new hydro power projects in Scotland. The Scottish Government will continue to urge the UK government to provide an appropriate market mechanism for hydro power and other long duration energy storage technologies, to ensure that the potential for hydro power is fully realised.”
Expansion of London’s ultra-low emission zone (ULEZ) ruled lawful
The High Court has ruled that the expansion of the ultra-low emission zone (ULEZ) to outer London boroughs is lawful. Under the new scheme vehicles that do not meet emissions standards will be charged £12.50 a day to drive anywhere in London from 29th August. It is hoped that the expanded ULEZ will incentivise people to use cleaner transport alternatives to help improve air quality.
The ULEZ scheme was drawn up by the previous Mayor of London Boris Johnson. By the time it was introduced in 2019, Labour’s Sadiq Khan had taken over as Mayor. The scheme originally covered the same area as the Congestion Zone in central London but was expanded in 2021 to include all areas inside the North and South Circular roads.
Sadiq Khan’s plan to expand ULEZ to cover all 29 Greater London boroughs has been controversial with five Conservative-led councils raising a legal challenge against the consultation process. The issue was seen as the key factor in the Conservatives narrowly winning the Uxbridge and South Ruislip by-election last week. However, the High Court judge ruled that “while the consultation conducted was not in-depth, it was lawful.”
Mr Khan said: “The decision to expand the ULEZ was very difficult and not something I took lightly, and I continue to do everything possible to address any concerns Londoners may have. The coming expansion will see 5 million more Londoners being able to breathe cleaner air.”
“Nine out of 10 cars seen driving in outer London on an average day are already compliant, so won’t pay a penny – yet will still see the benefits of cleaner air. Air pollution is an urgent public health crisis – our children are growing up with stunted lungs, and it is linked to a host of serious conditions, from heart disease to cancer and dementia,” he added.
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