The UK paid Royal Dutch Shell $116 million of tax rebates in 2019, while the company reported $92.1 billion revenues in the UK for the year.
Internationally, Shell made pre-tax profits of $25.5 billion in 2019, and paid $7.8 billion income tax and $5.9 billion royalties, across dozens of countries. But the UK, France, South Africa and Indonesia handed money back to Shell.
The figures were published last month by Shell. The UK tax rebate to Shell also shows up in the UK Extractive Industries Transparency Initiative (EITI) report, published last week, along with a smaller £14.7 million tax rebate to BP.
At least the UK’s upstream oil industry as a whole paid some tax in 2019 (£1.43 billion) – unlike 2015 and 2016, when the Treasury paid out more in rebates than it collected in tax (as shown in this earlier EITI report).
Shell and BP’s rebates are part of the hugely generous system of tax breaks for North Sea producers, linked to the decommissioning of declining oil fields (and analysed last year in the Sea Change report by Platform, Oil Change International and Friends of the Earth).
These are subsidies to fossil fuel production, running into billions of pounds, devised by a Tory government that claims to be taking action on climate change.
And the problem runs deeper. North Sea oil production has since the 1980s been taxed with profit-based, rather than resource-based, methods, which gave the international companies access to the resources in the ground on unprecedentedly favourable terms.
The central role of these tax arrangements in the neoliberal “process of redefinition of the economic frontiers of the state” was analysed in this article by Juan Carlos Boué, published by Scot.E3, the just transition campaign group.
More about the North Sea
■ What the BiFab disaster tells us about class rule – Scot.E3
■ Crisis, North Sea oil and Covid 19 – Platform
■ North Sea oil and gas: the elephant in the room – People & Nature, October 2019
■ The reaction to the Piper Alpha disaster 1988 – People & Nature
The UK tax model was promoted across the world and “destabilised many key petroleum producers, whose governments found themselves starved of fiscal income”, Boué argues.
This is all politically relevant right now, as trade unionists and environmentalists seek ways to unite to ensure a just transition away from oil and gas production on the North Sea.
There have been some vital steps forward in recent weeks.
In September, a report compiled by Platform, Friends of the Earth Scotland and Greenpeace gave voice to North Sea workers’ views on just transition. It was based on a survey of 1,383 workers, all in upstream oil and gas.
The report showed that most people who actually work on the North Sea (91 percent of respondents) had never even heard the term “just transition” – a reminder of the yawning gap between working people on one hand and political, academic, trade union, green and “left” circles on the other.
The report – which was greeted by the Rail Maritime and Transport (RMT) union – also showed that North Sea workers definitely embrace the idea of moving out of oil and gas production and into offshore wind, in particular, and other twenty-first century ways of doing things in general.
The respondents were overwhelmingly positive about retraining and moving to other industries, and offshore wind was the favourite choice.
On a webinar arranged by Platform last week, three offshore workers gave their views, together with a trade union official (Jake Molloy of the RMT), a Labour politician (Lewis MacDonald, Member of Scottish parliament) and an energy researcher (Anna Markova, Transition Economics).
The workers spoke of the hardship and demoralisation caused when the oil price falls and big companies shed labour, which they have been doing throughout the coronavirus pandemic. The high level of casualisation on the North Sea makes matters worse.
Workers who hope to move to offshore wind jobs are further aggrieved by an unjust, bureaucratic qualifications regime.
They are required to pay for re-training courses from their own pockets – at the very moment when they are looking for a job and short of money.
Many companies add insult to injury by requiring them to do basic safety training that covers issues they have learned over decades offshore.
The webinar provided space to reflect on what a worker-led just transition would look like. Jake Molloy of RMT pointed to the huge job, now starting, of decommissioning old oil rigs.
“The steel should be recycled and used for wind turbines”, he suggested. He said similar things when addressing the Scottish TUC recently. (See this recording, at 4 hours 52 minutes.)
Such suggestions will take on meaning if they are linked to calls for public ownership, and for an end to the subsidies paid to oil and gas producers, in my view.
Only public corporations, acting in the interests of society as a whole and not for profit, would be able to act on proposals such as Molloy’s. Running down oil and gas production, and decarbonising the economy, needs integrated approaches by entities that take full account of the social and climate consequences of their actions.
Only moves towards public ownership can challenge the energy companies who see the North Sea as one part of their global operations, and use their lobbying power to mould the tax regime to their interests.
At last week’s webinar, repeated mention was made of work that could be done in the UK, e.g. building and repairing rigs and wind turbines, being done elsewhere.
There is a danger of the labour movement approaching this as a competition between workers in different places, going back along the road trod by Gordon Brown, with his notorious call for “British jobs for British workers”.
This can only feed the divisive nationalism and protectionism to which the Johnson government appeals.
A campaign for public ownership, by contrast, highlights the fact that the state can be used to challenge the power of multinational capital and constrain its exploitation of working people and of natural resources.
It highlights the fact that state action could run down oil and gas production on the North Sea, expand electricity generation from renewable sources, and develop other industries in the areas where communities now rely on employment offshore.
A campaign for public ownership to underpin a just transition could start to challenge the multinational oil companies and their accomplices in government, and unite offshore workers with school students and all those demanding rapid action to stop dangerous climate change.
As the discussion on just transition got started in Scotland, Shell’s truth-bending claims that it is doing something about climate change have been taking a beating. Several senior executives in its renewables energy business have quit, amid what the Financial Times reported is “frustration” at the minute quantity of investment in non-carbon technologies.
Two big court cases against Shell by Friends of the Earth Netherlands are close to their conclusion. The first is to compel the company to clean up the damage it has done over decades to the Niger Delta, in Nigeria, where it produces oil. The second case is aimed at forcing Shell to reduce its carbon emissions.
Simon Pirani is an energy researcher and historian. His most recent book is Burning Up: A Global History of Fossil Fuel Consumption (Pluto 2018). He blogs at People and Nature and tweets as @SimonPirani1. This article originally appeared under the pseudonym Gabriel Levy.