Shell expects $2 billion tax hit in the fourth quarter

Jan. 6 (UPI) -- Energy supermajor Shell said Friday it expected to take on an additional tax burden of $2 billion due to a new windfall tax imposed by the British and European governments.

Shell provided the market with a preview of its performance during the fourth quarter, saying it expected to see an adjusted net loss of between $550 million and $750 million.

Earnings will reflect additional taxes to the tune of around $2 billion from the European Union and a deferred impact on a levy on profits imposed by the British government last year.

"These impacts will be reported as identified items and therefore will not impact fourth quarter adjusted earnings and will have limited cash impact in the fourth quarter given the expected timing of payments," the company added.

The European Union in September agreed to impose a levy on profits that come in 33% higher than average. The British government followed suit in November by adopting a windfall tax of 35%, which could bring in as much as $40 billion for the government over the next six years.

Shell reported profits of around $9.5 billion during the third quarter, compared with $4.2 billion in profits during the same period in 2021.

The surge in profits comes in a time of record-high energy costs for consumers. Commodity prices soared during much of the first half of last year as pent-up consumer demand collided with the loss of Russian crude oil and natural gas to Western-backed sanctions.

Ben van Beurden, who stepped down as the head of Shell last year, told a London energy conference in October that new tax burdens may be an inevitable result of the spike in commodity prices in 2022, which hit consumers hard given the high rate of inflation in most major economies.

"One way or another there needs to be government intervention," he said. "Protecting the poorest, that probably may then mean that governments need to tax people in this room to pay for it."

Van Beurden was replaced by Wael Sawanhe, the former director of integrated gas, renewables and energy solutions.

Elsewhere, Shell said it expected its liquefied natural gas volumes to come in lower than expected during the fourth quarter due to outages at two facilities in Australia, though it anticipates LNG trading volumes to come in "significantly higher" than during the third quarter.

Oil products trading, meanwhile, should be "significantly lower" than the previous quarter.

Shell releases fourth quarter results on Feb. 3.