Royal Dutch Shell said yesterday that Chancellor George Osborne’s £10billion raid on North Sea operators would add £366million to its tax bill by the end of next year.
The oil and gas giant expects the increase on production levies to cost it an extra £126million in 2011.
If the oil price remains at current levels, the tax rise is expected to cost the firm an extra £60million every quarter next year as maintenance work finishes and operations increase.
Shell said it had already paid an extra £36million after Mr Osborne’s surprise Budget decision to raise the supplementary tax rate to 32%. The increase is expected to add £30million to Shell’s tax bill in each of the second, third and final quarters of this year.
Shell said it would be a further £300million worse off if UK Government proposals to restrict tax relief on decommissioning expenditure to 50% go ahead.
News of the latest financial hit from Mr Osborne’s controversial tax strike came as Shell announced pre-tax profits of £9.8billion for the first three months of this year, a 65% rise on the same period last year.
The Anglo-Dutch company attributed the increase to higher industry margins amid rising oil prices.
Current cost of supply net profits – stripping out gains or losses on the value of inventories – were up 30% to £3.8billion, while revenue rose by more than £14billion to nearly £66billion.
Simon Henry, Shell’s chief financial officer, said smaller North Sea fields would not be economically viable if infrastructure set up for major projects was decommissioned as a result of the tax rise and could no longer be used.
He said two major projects, Clair and Schiehallion, were likely to be given the go-ahead later this year but other smaller projects looked more challenging.
Mr Henry added: “Looking across every operating activity, it is pretty clear that the lifetime operation will be reduced by around one to two years simply because it will no longer be economic.
“Infrastructure is likely to be decommissioned, making it unavailable for other smaller, marginal fields.”
On Wednesday, BP said it had set aside £412million to cope with its expected additional North Sea tax burden.
BP said pre-tax profits for the first quarter came in at £6.8billion, compared with £5.65billion in the same period last year.
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