George Osborne reiterated today the UK government’s “determination to be the greenest government ever”. But given what we already knew, most of the new information contained in Wednesday’s Budget seems to be set against that agenda.
Let’s take the measures one-by-one:
1) CCS support. We already knew that £1bn was pledged for round one. The new information in the Budget is that round two will be funded largely by the carbon floor price.
But as Mr Osborne himself admitted, this won’t be enough (at least at the level it has been set) on its own. Further money will be required from general taxation, which leaves second round CCS projects fighting alongside everything else for a rapidly diminishing pool of government spending.
George Osborne, the UK chancellor, has just announced his tax measures for the next year, and the biggest surprise came with a cut to fuel duty, to be funded by extra charges on North Sea oil producers if the oil price remains over a certain price somewhere around $75 a barrel. The supplementary charge for such companies will now go from 20 per cent to 32 per cent.
So the North Sea’s big oil and gas producers must be suffering, right? Well, no.
For the big companies this means little – the North Sea is a declining asset, which will not mean much in the long term, and the £2bn raised altogether from this tax is nothing compared to their incomes (for comparison, Shell’s pre-tax net income last year was $35.3bn, about £21.7bn). That’s why their share price hasn’t budged in reaction.
Image by Shell
Shell said last week that this year was the “year of delivery” in its three year plan to boost profits and growth.
It took a big step towards that on Wednesday when it announced that gas was now flowing into the Pearl gas-to-liquid plant in Qatar. The project is expected to add nealry 8 per cent to the company’s worldwide gas production, and is the principal source of growth for next year. The company reiterated its target to reach full production in 2012.
Investors, however, are not especially impressed. Shell’s shares rose slightly in morning trading in a rising market, but lagged those of its main rival, BP. In part that is because the news is no surprise – the company’s CEO indicated last week that the project was on track.
But it is also an indication that the company has a lot more targets ahead of it which it needs to hit to achieve its ambitious plans.