North Sea Oil and Gas Taxation and Lobbying
This report concerns lobbying by North Sea oil majors to lower their tax burden and is released prior to the March 8th Spring Budget.
The last few years has seen a significant reduction in the tax North Sea operators pay to extract oil and gas, to the point where the UK Treasury is now paying the sector £24m per year to operate. The industry has achieved this by a variety of influencing tactics aimed at multiple levels of the tax policy making process.
Putting pressure on the UK Chancellor Philip Hammond prior to the 2017 Budget the North Sea operators are now lobbying for the burden of decommissioning ageing oil fields to be bourne in a large part by the UK taxpayer. These costs are expected to escalate to £53bn in the next decade in what has been described as a "decommissioning time bomb".
Led by the oil majors and the trade association Oil & Gas UK, the industry has been effective in communicating that tax cuts are necessary to protect jobs and small companies and to ensure the future viability of the North Sea, with emphasis on how much the industry is struggling. This is despite the fact that the sector is dominated by global oil majors whose profits have robustly rebounded in the last year.
The role of Big Four accounting firms EY and PwC is notable for their promotion of a low tax burden for big oil, given their clout on tax issues and role as external auditor to leading North Sea operators Shell, BP, ExxonMobil, Chevron and others.
“We’ve long known that the fossil fuel industry has aggressively lobbied for tax breaks and subsidies – and this report makes clear that they have extraordinary access to government officials and ministers when doing so. After making colossal profits from publicly-owned resources in the North Sea, big oil must foot the bill for decommissioning. With the industry lobbying hard for further tax breaks in next week’s budget, the Chancellor must not cave into pressure by giving more hand-outs to the dirty energy.“ - Caroline Lucas, MP
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