BP's £29m a day profit raises pressure for oil windfall tax

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The Independent Online

BP Amoco, the oil giant, yesterday reported a 90 per cent increase in profits to $42m (£29m) a day for the third quarter, adding fuel to charges of profiteering among oil majors.

BP Amoco, the oil giant, yesterday reported a 90 per cent increase in profits to $42m (£29m) a day for the third quarter, adding fuel to charges of profiteering among oil majors.

But the company added that due to September's fuel blockages it lost $21m in its UK petrol operations in the period, and that competition on the forecourts meant that even in normal times it would only make 1p a litre profit on UK petrol sales.

The company's overall profit reached a record $3.8bn, or $1.8m an hour, after adjusting for exceptional items, for the three months to September 30. This was up from $2bn for the period in 1999.

The company warned, however, that recent talk of a windfall tax on profits from North Sea production, which have soared on the back of historically high oil prices, would lead BP Amoco to reconsider its future investment plans.

Gordon Brown, the Chancellor, who will make his Pre-Budget Report [PBR] today, has been under pressure to introduce such a tax. The oil tax regime was put under review by the Government in 1997, but nothing has been announced. September's protests over petrol taxes put the concept back on the political agenda.

John Buchanan, BP's chief financial officer, said: "The Government must be aware that tax regimes are competitive too. Talk of this tax is unwelcome. If it were to come about, we could invest in, say, the Gulf of Mexico, rather than the North Sea."

On the defensive over its UK earnings, BP said that while 20 per cent of profits came from the UK in the third quarter, it paid 27 per cent of its tax here. BP made a profit of £1.07bn on its North Sea operations during the third quarter, and £3.1bn for the year so far.

The company said that it had made a profit of $2.7bn through UK businesses over the last seven quarters but had re-invested $2bn of that in this country. Rodney Chase, BP's deputy chief executive, said: "We have contributed substantially to economic activity in this country and directly employ 20,000 people."

Overall, the company's total earnings for the first nine months of the year reached $10.1bn after exceptional items, up from £4.1bn for the period last year.

Richard Savage, an analyst at SG Securities, said: "The idea of a windfall tax is being taken seriously by the industry and these results show that they would not have a leg to stand on.

"Oil companies told the Chancellor in 1998 that we were in an era of low oil prices, and he shied away from the idea. Look what's happened to oil prices since." The price of crude oil has jumped from about $10 a barrel at the start of last year to more than $30 a barrel today.

Mr Savage said that Britain, which is the eighth-biggest oil producer, had the second-most generous tax policy in the world. "There is a very real risk of the review [into North Sea profits] being re-opened. Coming a day after these results, the Chancellor will have the necessary ammunition [in the PBR]."

While BP enjoyed bumper profits across the group, the company was yesterday keen to stress that this profitability did not extend to British petrol stations. The company said that, due to September's fuel blockages, it lost $21m in its UK retail operations during the third quarter, whereas it typically makes a profit of around $17m a quarter in the business. For Europe as a whole, the protests cost BP $50m during the period, nearly half of that in the UK.

Mr Chase said: "This [UK retail] is a fiercely competitive and the margins are wafer thin, typically around 1p a litre."