North Sea oil producers making massive profits as costs fall and prices rise. Are we taxing them, or might that damage the Unionist case?

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According to the Oil & Gas Authority, reported in Energy Voice, today, North Sea producers have been able to cut their costs by 14% to around $12 per barrel. Between 2014 and 2016, costs fell by 25%. We heard in September, BP CEO Bob Dudley say:

‘This focus on standardization, simplification and discipline on cost has contributed to our average production costs in the North Sea coming down from a peak of over $30 a barrel in 2014, to less than $15 a barrel today. Heading towards 2020, with all our major new developments coming into production, we expect that to come down below $12 a barrel in the North Sea.

See this for more detail:

North Sea oil companies making $40 profit on every barrel and costs are still falling!

The scope for raising revenue from this level of profitability is clear yet the UK government seems inexplicably hesitant to tax the oil companies. It’s hard to find any other plausible explanation other than that offered in 2016 by the International Transport Workers’ Federation and reported in Tax Justice:

‘New analysis of the UK’s North Sea oil and gas suggests that the combination of tax giveaways by the government, and aggressive avoidance by multinationals, means that the country may actually be subsidising the extraction of its natural resources. A new report published today by the International Transport Workers’ Federation (ITF) sets out a series of shocking statistics on the UK’s failure to obtain an appropriate share of its own resource wealth. Among them, these stand out:

  • In 2014, UK consumers paid 6 times more tax on petrol, excluding VAT, than the North Sea oil and gas industry paid on all taxes related to production.
  • Chevron’s effective tax rate in 2014 on earnings from North Sea production was 5.4%; statutory tax rates (of various types) on oil and gas should have totalled 61-82%.
  • In 2014, 3 (Shell, BP & Total) of the top 4 North Sea producers produced more than £4.3 billion worth of oil and gas and received over £300 million in net tax refunds.

The ITF argue that while the oil sector has successfully lobbied for and won huge tax breaks from the UK government, the companies involved continued to pursue aggressive tax avoidance as standard practice. The Chevron report (see graphic for UK structure, click to enlarge) provides a detailed case study of tax dodging tactics which are replicated by others, particularly Nexen – on which the Times had a frontpage splash yesterday, using ITF analysis to show that the Chinese government-backed company received tax credits of £2 billion.’

http://www.taxjustice.net/2016/08/25/uks-north-sea-oil-revenues-giving-away/

A fuller account is here:

Why were tens of billions in oil revenues lost by UK government? Would they have made Scotland seem too wealthy in September 2014?

Is this a scandalous strategy, still there three years later, to undermine the Independence movement at any cost?

https://www.energyvoice.com/oilandgas/north-sea/158928/north-sea-operating-costs-drop-14-oga-says/

 

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5 thoughts on “North Sea oil producers making massive profits as costs fall and prices rise. Are we taxing them, or might that damage the Unionist case?

  1. William Henderson December 15, 2017 / 5:19 pm

    The Norwegians did the job properly. Own them and take the profits.

    As you say, the armies of accountants fielded by the big International can always find ways to minimise, avoid or evade taxes.

    Like

  2. Alasdair Macdonald December 15, 2017 / 10:17 pm

    I do not think they are taxing them very much. Indeed, I think they are receiving tax refunds related to decommissioning of fields and the right to such rebates has recently been transferrable when ownership of fields changes. Oil producers are now finding that they can squeeze more oil out of fields which around 2014 were all at the end of their ‘economic’ lifespan.

    Liked by 1 person

  3. Ludo Thierry December 17, 2017 / 9:01 pm

    Bit of good news from Richard Murphy’s blog regarding some money laundering stuff passed at the European Parlt. on Friday (see below):

    Yesterday the EU Parliament revised the terms of the European Fourth Anti-Money Laundering Directive. As a result, and as the Guardian notes the revised terms include:
    • A requirement for companies to disclose their beneficial, or true, owners in a publicly available register.
    • Data on the beneficial owners of trusts to be available to tax and law enforcement authorities, as well as sectors with an obligation to follow anti-money laundering rules, such as lawyers.
    • A requirement for member states to verify beneficial ownership information submitted to their registers.
    • Extending anti-money laundering and counter-terrorism regulations to apply to virtual currencies, provision of tax services and those dealing in works of art.
    EU member states, including the UK, have just 18 months to translate these requirements into law. It is possible that this might still mean that the UK’s Crown Dependencies and Overseas Territories might also be required to comply.

    It is this sort of slow, grinding progress on international tax avoidance/evasion regulations that the EU is, pretty much, driving on the global level. One of the big reasons I hope an Indy Scot can remain as an active member (despite the manifold shortcomings of the EU).

    Liked by 1 person

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