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Shell and BP Pay No Tax on North Sea Oil and Gas for Three Years | Oil and gas companies

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Shell and BP, which together produce more than 1.7 billion tonnes of greenhouse gases per year, have paid no corporate taxes on oil and gas production in the North Sea for the past three years, company records reveal.

Oil giants, which have an annual global greenhouse gas footprint more than five times that of Britain, benefit from billions of pounds in tax breaks and relief for oil and gas production .

Shell and BP paid no corporate taxes or production levies on North Sea oil operations between 2018 and 2020, and have called for tax breaks of nearly £ 400million, according to annual reports on “payments to governments” analyzed by the Observer.

Over the same three-year period, they paid shareholders over £ 44 billion in dividends.

Oil giants seek to exploit new areas in the North Sea

A 35% oil revenue tax was effectively removed by then Chancellor George Osborne in 2016 and the oil giants can claim billions of pounds in donations from taxpayers for the dismantling of rigs.

The North Sea is now one of the most profitable areas in the world for oil and gas production, after government tax cuts to encourage production.

Shell and BP have set targets to achieve net zero carbon emissions by 2050 by investing in cleaner energy, but say the UK will continue to need oil and gas from the North Sea, which also support thousands of jobs.

Climate activists are now challenging the UK tax regime in a court case. They want payments to be removed and a ban on any new oil and gas projects in the North Sea to help cut carbon emissions.

Philip Evans, oil and gas campaigner for Greenpeace UK, said: “It is outrageous that as the UK prepares to host global climate talks in Glasgow, we still have one of the rates lowest effective tax rate in the world for oil extraction.

“We are giving tax breaks worth billions of pounds to companies that have fueled the climate emergency for decades. “

There are around 180 oil rigs in the North Sea and the sector has generated around £ 360bn in net tax revenue since 1970, or around £ 7.2bn per year.

The UK has one of the lowest petroleum tax rates in the world. An analysis by research firm Rystad Energy in January found that the UK is now the most profitable country in the world for developing oil and gas “mega-projects”.

Taxpayers will foot a bill of more than £ 18 billion for dismantling oil and gas infrastructure in the North Sea until 2065 – made up of tax refunds and a reduction in offshore corporate taxes. Campaigners want the documents to be scrapped and used to invest in clean energy.

Kwasi Kwarteng, the business secretary, faces a legal challenge over the distribution of taxes to oil and gas operators by activists. Paid to Pollute, a group of environmental organizations, says taxpayer donations to oil and gas companies are illegal because they violate the UK’s legal obligation to achieve net zero emissions by 2050. A review court must be heard before the end of the year.

Gabrielle Jeliazkov, activist for Platform, a British group that investigates the social and environmental effects of the global oil industry and supports the legal case, said: “The government has spent too much time supporting the oil giants through ‘tax breaks and subsidies. This has had devastating consequences for the climate.

Shell and BP also face strong opposition over new projects in the North Sea. A report released last week by Friends of the Earth and the New Economics Foundation found that the oil and gas industry is preparing to seek approval for 30 offshore oil and gas projects by 2025.

Shell has defended plans for the Cambo Project, a controversial oil field off the Shetlands that contains around 800 million barrels of oil and is awaiting approval from the Oil and Gas Authority, a government licensing body. Greenpeace lost a legal bid this month for the government to withdraw BP’s permit to drill on the Vorlich oil field in the North Sea, which began production in November last year.

It was reported by Reuters last week that the Offshore Petroleum Regulator for Environment and Decommissioning had rejected Shell’s plans to develop the Jackdaw gas field in the North Sea after reviewing its environmental statement.

A Shell spokesperson said: “Our total oil production has already peaked in 2019 and we expect it to continue to decline, including through divestitures. We are already investing billions of dollars in low carbon energy. The North Sea Transition Agreement reached earlier this year also indicates how the sector will reduce emissions in line with the government’s net zero targets. The company said it paid no corporate taxes on North Sea production last year due to tax losses in previous years.

A BP spokesperson said: “All of BP’s North Sea assets are owned by companies subject to UK tax under UK law. Over the years, BP has paid more than £ 40 billion in taxes to the UK government on its North Sea operations.

“In recent years, in line with long-standing UK tax regulations, the tax breaks on the large investments we have recently made in the North Sea business and the challenging pricing environment, including the sharp drop in prices oil in 2015 and 2020, meant we paid no North Sea corporate taxes.

A government spokesperson said: ‘The UK oil and gas industry has paid around £ 375 billion in production taxes to date – with North Sea companies being subject to aggregate rates which are higher. double that paid by other companies.

“Reducing decommissioning costs is a fundamental part of the UK tax system, helping to safely remove oil and gas infrastructure from our natural environment while ensuring that businesses are encouraged to invest in the UK. “

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