BP Says Tax Hike Will Lead To Decreased North Sea Investment

by Robert Lee, Tax-News.com, London

02 May 2002

According to reports, BP has announced that North Sea investment will be reduced as a result of the recent budget decision to increase oil company profit taxes.

Speaking to the Independent on Wednesday, the Chief Executive of BP, Lord Browne, revealed that the tax increases will bump the oil company's tax bill up to over £137 million this year, and will lift its effective rate of tax 2% to 38%.

'What we will see is that over time the amount of investment in the North Sea will reduce,' the BP head told the Independent, adding that: 'We do not think the tax increase is a good thing, and we would like it reversed.'

In its response to the April 17 budget, the UK Offshore Operators Association (UKOOA), which represents 30 oil and gas exploration and production companies operating in the UK, said that it was 'surprised and concerned' about the tax increase, and indeed it seems to be the element of surprise which has stuck in BP's throat.

Under the auspices of the UKOOA, the oil company wrote to Gordon Brown, and the Secretary of State for Trade and Industry, Patricia Hewitt, asking them to reconsider, or to immediately go ahead with the proposed scrapping of the levy on North Sea oil production, which the Chancellor said recently that he was putting out to consultation.

'I don't see why there should be consultation on the issue of royalties when there was no consultation on tax,' the Independent quoted Lord Browne as observing.

Recommended