The world's second-largest oil company raked in record numbers, and it could be time for a windfall tax. But it's not all smooth sailing for BP
BP made record profits of $13.4bn (£6.8bn) in the first half of the year, reigniting calls for a windfall tax on energy companies to help offset the impact of rising prices on the less well-off.
The world's second largest oil company saw profits rise by 23 per cent compared with the first six months of 2007, and rise by 6 per cent to $6.9bn for the second quarter alone.
But despite analyst-beating figures, and a quarterly dividend up by 29 per cent, it is not all plain sailing for BP. "We are all operating in interesting times," Tony Hayward, the chief executive, said yesterday.
"The world's economy is weakening and the global political situation is delicate. The oil price continues to be high and volatile. Against this background, BP is making steady progress."
The key difference is between the performance of the upstream exploration and production div-ision, and the downstream refining and marketing unit, in the light of oil price rises that have jumped by around 35 per cent in the last three months and topped $144 per barrel at the end of June.
Upstream the business is strong, with profits at $10.8bn in the second quarter, compared with $7.1bn a year ago.
But downstream, the business is being hit by falling demand—particularly in the US—which has pushed profits down to $539m from $2.7bn a year ago. "We have the wind in our sails in the Upstream, although in Downstream it feels more like sailing into a gale," Mr Hayward said .
Yesterday's share price dip—off 2.45 per cent to 506.75p—reflects the concerns.
But the net profits are still consensus-beating for the second quarter in a row, sparking renewed interest in the possibility of the Government levying a windfall tax on energy companies profiting from rising prices.
A report from MPs last week said there is a "compelling rationale" for such a scheme, and environmental groups are also in favour.
Mike Childs, the campaigns director at Friends of the Earth, said: "The Government must introduce a windfall tax on huge oil company profits and invest the money on a comprehensive programme to make homes—especially those of the fuel-poor—far more energy efficient."
BP refused to be drawn on what it calls "a matter for the Government."
It pointed out, however, that the company paid the UK Exchequer $2.33bn last year. This was out of a worldwide tax bill of $14.5bn, and made it one of the country's largest taxpayers in terms of taxes on profits and operations. It also collects some $10.5bn in excise duties on behalf of the UK Government.
The oil major also took the opportunity yesterday to talk tough on the matter of TNK-BP, the joint venture subject to major friction with its Russian billionaire investors.
"The other shareholders want to tear up the agreement that they willingly signed in 2003," Mr Hayward said.
"We are not prepared to do that and will vigorously defend our rights using all legal means at our disposal. We will not be intimidated by strong arm tactics."