North Sea oil companies demand tax breaks in budget, despite 6 years of eye-watering profit levels

Press Release 16 Mar 2015 admin

Press release from Platform and Oil Change International

Contact:  Mika Minio-Paluello – Platform – 020 7403 3738 / 07733466038      ///////         Greg Muttitt – Oil Change International – 07508 421 527

Figures released today show that North Sea oil and gas companies are many more times profitable than other businesses in the UK and already benefit from existing generous tax breaks.

The new calculations come as George Osborne is considering further tax breaks to cushion the North Sea Oil industry, experiencing a downturn because of steep oil price falls.

Calculations by Platform and Oil Change International, based on government figures, show that between April 2009 and March 2014 when the oil price was high, companies generated huge profits from UK North Sea oil, amounting to £47.3 billion in free cash flow or £9.5 billion per year. This more than offsets the negative cashflow of £5.3 bn that the industry claims in 2014 as the argument for tax cuts. [1]

According to the Office for National Statistics, between 2008 and 2014 oil companies in the UK North Sea achieved an average rate of return of 33%, compared to 10% achieved by the rest of the UK economy (excluding the financial sector). [2]

However, instead of investing those profits to protect workers and business operations in a downturn, multi-national fossil fuel companies are now appealing to UK taxpayers for more hand-outs.

Based on UK government definitions, existing tax breaks would fall under what David Cameron has described as “economically and environmentally perverse fossil fuel subsidies, which distort free markets and rip off taxpayers.” [3]

Research by the Overseas Development Institute and Oil Change International has showed that the UK has already provided national subsidies for exploration and extraction, including tax breaks, valued at up to £757 million a year. [4]

Between 2009 and 2014, those included: £528 million to Total (HQ France); £256 million to Statoil (Norway); £144 million to Centrica (UK); £45 million to Chevron (USA).

Platform and Oil Change International said “Giving more tax breaks to the North Sea Oil industry, at a time when the world needs to move beyond fossil fuel reliance because of climate change, sends the wrong signal.”

“The UK Chancellor should resist the lobbying from the powerful oil and gas companies. Countries, like Indonesia and Malaysia, are taking the opportunity of the low-oil prices, to remove fossil fuel subsidies.”

“For years, North Sea companies used low UK tax rates to subsidise drilling abroad. Now that they’ve hit a lean year, they’re demanding that the burden be transferred to the public. Calls for more subsidies and lower tax rates are an attempt to maintain eye-watering levels of profit, while the rest of the country is going through austerity.”

“It is ironic that the UK is considering increasing its support to an industry which actually provides less than 1% of government revenue, and employs less than 0.1% of its workforce” [5]


Notes to editors:

1: Total free cash flow = gross operating surplus – taxes – investment

Gross operating surplus Q2 2009 – Q1 2014: £128.4 bn (Office for National Statistics series LRWX – updated Jan 2015,

Taxes, tax years 2009/10 – 2013/14: £35.9 bn (HMRC, “Statistics of Government revenues from UK oil and gas production” – updated Dec 2014,, p.7)

Investment, Q2 2009 – Q1 2014: £45.2 bn (DECC “UK energy sector indicators 2014: economic indicators dataset”, in October 2014, worksheet 1.9. Since these figures are only available for calendar years, we have adjusted to tax years by assuming investment evenly spread over each year multiplied 2009 figure by 0.75 and 2013 figure by 1.25)

Free cash flow = £128.4 bn – £35.9 bn – £45.2bn = £47.3 bn

Oil & Gas UK gives £5.3 negative cash flow in press release ‘Report paints bleak picture of high-potential industry but the solution is clear’, 24 February 2015,

2: The data is sourced from the Office for National Statistics, series LRXP and LRXE, updated January 2015.

3: Cameron was speaking at the climate change summit in New York, September 2014.

The government has defined fossil fuel subsidies as: “any government measure or programme with the objective or direct consequence of reducing, below world-market prices, including all costs of transport, refining and distribution, the effective cost of fossil fuels paid by final consumers, or of reducing the costs or increasing the revenues of fossil-fuel producing companies” (emphasis added). Priti Patel, answer to written parliamentary question, 6 November 2014.

4: the Fossil Fuel Bail Out report p 60
5: Total upstream oil tax 2011/12: £10.9 bn (, p.7)
Total govt revenue 2011/12: £616.6 bn (
In 2013/14 the oil industry provided less than 1% of UK tax receipts.

Oil & Gas UK says 36k employed by operating cos and 200,000 by supply chain ( p.13)
Total UK workforce 30.9m (–february-2015.html)
If we also include employment by the supply chain, it comes to 0.8% of the workforce

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