Britain paid Shell to keep its North Sea oil fields running

While the second-largest oil group in the world paid billions to governments from Nigeria to Norway, the payments it received from the British government indicate the toll taken on Treasury coffers by the collapse in the price of oil.

The Times reports that Shell received a net $123 million (£86 million) from the UK government last year, largely because of changes to the tax system that entitled it to a rebate relating to its historic Brent oilfield.

Brent, which is estimated to have generated more than £20 billion in tax over its 40-year life, is being decommissioned.

In 2014, Shell received a net $334 million relating to corporate taxes in Britain. By contrast, in the Norwegian North Sea, where installations typically are younger and more productive than those in UK waters, Shell paid $4.1 billion in production entitlements, taxes and fees.

Ben van Beurden, chief executive of Shell, said last week that the recently completed acquisition of BG Group meant that the company would have to reconsider its North Sea operations. The company, which employs about 2,500 staff in the North Sea, has hired Bank of America Merrill Lynch to assess its North Sea assets.

Tax revenues from the North Sea are expected to stay negative for the next five years, according to the Office for Budget Responsibility. North Sea taxes raised about £33 billion in today’s prices in the mid-1980s, but in the five years to 2021 the OBR forecasts that North Sea tax rebates will drain £4.9 billion from government coffers.

The chancellor has cut North Sea taxes in an attempt to extend the basin’s life amid plunging oil prices. About 65,000 North Sea workers have lost their jobs since oil prices began sliding nearly two years ago.

Shell’s biggest contributions to governments came in the form of production entitlements, when governments earn a share of production in Shell-operated oilfields. The biggest recipients were Nigeria, which received $5 billion, and Malaysia, with $4.4 billion. Twenty-four countries were included in the report.