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BP has paid around $1 billion in taxes on its UK North Sea profits since the so-called windfall tax was introduced in May 2022, according to estimates from Bloomberg.
During the first quarter of 2023, BP paid around $300 million for the Energy Profits Levy (EPL), as the windfall tax is formally known, the supermajor’s CFO Murray Auchincloss told Bloomberg in an interview on Tuesday, when BP announced its first-quarter profits.
The tax paid in the first quarter brings the total taxes paid for the EPL to some $1 billion, according to Bloomberg.
Despite falling oil and gas prices, BP on Tuesday reported $5 billion in profits for the first quarter, higher than the earnings for the fourth quarter of 2022 and above consensus estimates, thanks to what it described as “exceptional” gas trading and “a very strong oil trading result.”
Excluding adjusting items, the underlying effective tax rate (ETR) for the first quarter was 39%, compared with 33% for the same period a year ago, BP said.
“The higher underlying ETR for the first quarter reflects the UK Energy Profits Levy on North Sea profits and other items,” it noted.
Last week, another supermajor operating in the UK, TotalEnergies, said that its average tax rate of 41.4% in the first quarter of 2023 compares with 38.7% in the first quarter of 2022, mainly as a result of the higher tax rate for Exploration & Production, related notably to the Energy Profits Levy in the UK.
Last autumn, the UK raised the windfall tax on the profits of oil and gas operators by 10 percentage points to 35% from January 1, 2023. The UK also extended the levy to the end of March 2028, from December 31, 2025, as originally planned when the levy was 25%.
The total tax rate on the oil and gas sector has thus increased to a massive 75%, the highest of any UK sector.
The windfall tax on UK North Sea producers is hitting all companies, with firms already announcing lower investments and deferring drilling plans, David Whitehouse, chief executive of trade body Offshore Energies UK (OEUK), warned earlier this year.
Meanwhile, Ed Miliband, opposition Labour MP and Shadow Climate and Net Zero Secretary, criticized BP’s profits announced today, saying, “These enormous profits are the unearned windfalls of war. And every excess pound that the energy giants rake in is at the expense of British families.”
“Labour would be doing the fair thing and bring in a proper windfall tax on oil + gas giants to help freeze council tax this year,” said Miliband, whose Labour Party leads in polls ahead of the ruling Conservative Party.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com
Will it stop the use of fossil fuel use? No. Other countries with less governance , safety standards or employment ethics will fill the gap and oil will be more expensive.
So will everything derived from it. This tax system is as flawed as Ed Miliband's conclusions about the war creating these prices. They are lower than they were in December 21 and they are going lower for now. Expect a huge energy shock as the reduced investment hikes prices down the line. The result will be a repeat of this crazy policy as the companies get blamed for high prices again.