Shell Says 'Climate of Mistrust' Has Been Created By UK Oil Tax Hike

by Robert Lee, Tax-News.com, London

25 June 2002

The Shell Group has hit out at Gordon Brown over his new tax on operations in the North Sea, accusing the UK Chancellor of creating a 'climate of mistrust' amongst offshore oil operators.

Speaking to the Independent on Sunday, Shell's UK Chief Executive, Clive Mather descibed the move to impose an additional 10% corporate tax on oil and gas operations in the North Sea in the April budget as 'unexpected and unwelcome', and warned that it had jeopardised a joint venture established by the Department of Trade and Industry and several major oil companies to encourage investment in the North Sea.

'This tax bombshell has caused us to say "what is the point if the rules are going to change?" The climate created is one where we wonder whether there will be more to come,' Mr Mather told the Independent, revealing that the Anglo-Dutch Shell Group had entered the 'Pilot' scheme on the understanding that there would be no alteration to the tax or fiscal regime for oil companies operating in the North Sea.

The Independent report goes on to quote a personal letter from the UK Chief Executive to Gordon Brown, underlining the former's disappointment at the short-sighted move:

'We have invested substantial senior management time in Pilot and understood that the shared Government/industry agenda was to maintain fiscal stability in order to attract the maximum investment and innovation to the UKCS [North Sea]. Indeed we had assured our investors this was the case,' the letter read. It went on to add that: 'While the impact of this loss of confidence is difficult to quantify today, future years may see an erosion in interest and activity as a result.'

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