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Abstract

This briefing examines the leading UK energy companies in the context of the current energy crisis. Its purpose is to determine the extent to which leading firms in the sector have profited amid the recent market turmoil and to better understand the context in which a windfall tax could be imposed.

It examines the two major integrated oil and gas companies headquartered in the UK - BP and Royal Dutch Shell - along with the five companies that own the “Big 6” energy suppliers: Centrica Plc, SSE Plc, EDF SA (owner of EDF UK), E.ON SE (owner of E.ON UK and npower), and Iberdrola SA (owner of Scottish Power). It also examines eight leading independent oil and gas companies headquartered in the UK: Capricorn Energy, Egdon Resources, Energean Plc, Enquest Plc, Harbour Energy, Parkmead Group, Serica Energy and Tullow Oil. This list comprises all the UK-headquartered independent oil and gas firms that operate in the North Sea for which financial data are publicly available.

‍An earlier briefing set the scene for the current analysis by outlining the contours of the UK’s energy crisis. As documented in that earlier briefing, the dramatic hikes in wholesale gas prices are now being felt in consumer energy markets, with household energy bills predicted to rise by 30 percent in 2022, the highest increase since records began in 2009. In response to the unfolding crisis, the Labour Party, among other voices, has called for a one-off windfall tax on North Sea oil and gas companies to finance measures aimed at easing household energy bills.

Overall, the main message of this briefing is that the UK energy sector is highly diverse. This diversity must be taken into account when debating the implementation of a windfall tax. The briefing finds that the two UK-headquartered supermajors – BP and Royal Dutch Shell – have remained profitable over the past decade, and during that time have spent tens of millions of pounds on shareholder payouts, while receiving hundreds of millions of pounds in tax benefits. The performance of BP and Royal Dutch Shell offers an additional justification for a windfall tax. Meanwhile, seven of the eight independent oil and gas firms have not turned a profit in the past decade. All these companies are considerably smaller than BP and Royal Dutch Shell and they would therefore likely contribute little in terms of fiscal revenue if a windfall tax was introduced.

The briefing also finds a high level of diversity among the UK’s major energy suppliers. While all five energy utility companies reviewed in this briefing have been profitable since 2010, the two firms that have experienced sharpest increases in their profit margins during the current energy crisis – Centrica Plc and SSE Plc – engage in production operations in the North Sea. Furthermore, the briefing shows that the energy companies devote much more in resources to shareholders in dividends and stock buybacks than they do to governments in the form of tax payments. As a result, the current UK regime indirectly promotes inequality, undermines the resiliency of the energy sector, and provides compelling evidence on the need for a windfall tax.

Publication Type:	Report
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance H Social Sciences > HN Social history and conditions. Social problems. Social reform
Departments:	School of Policy & Global Affairs > International Politics

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