Jeremy Hunt faced renewed calls for an extension to the windfall tax on oil and gas companies as BP posted “eye-watering” profits of $8.2bn (£7bn) in the third quarter.
BP’s profits have soared this year as Russia’s invasion of Ukraine has pushed up wholesale gas prices. It said the performance of its gas business had been “exceptional”.
Analysts had expected a drop-off in BP’s huge profits to about $6.6bn in the third quarter of the year after it raked in $8.5bn in the second quarter – a 14-year profit high. However, the slowdown was smaller than expected, despite BP noting “weaker refining margins” and lower oil prices.
The $8.2bn third-quarter profit far outstrips the $3.3bn of underlying profits recorded in the equivalent period of 2021.
Ministers are considering whether to extend the windfall tax on North Sea oil and gas operators.
Hunt is reportedly examining increasing the windfall tax by up to five percentage points, to 30%, and extending its lifespan by three years, to 2028.
The FTSE 100 company said it expected to pay about $800m in windfall tax on its North Sea operations this year.
The figure covers the seven months from the levy’s introduction until the end of the year, and represents a fraction of the amount being paid out to shareholders. Its total tax bill on its North Sea operations this year would be about $2.5bn.
The energy profits levy was introduced in May by the then chancellor, Rishi Sunak, who estimated it could raise £5bn.
However, BP’s rival Shell said last week it had paid zero windfall tax in the UK, despite making record global profits of nearly $30bn so far this year. Its British corporate entity did not make any profits during the last quarter after investing in drilling more oil in the North Sea.
Hunt is due to present his tax and spending plans in his autumn statement on 17 November.
The US president, Joe Biden, on Monday called on large oil companies that are bringing in big profits to stop “war profiteering”, threatening to hit them with higher taxes if they do not increase production.
The company’s run of huge profits showed little sign of abating as it said it expected oil prices to “remain elevated” after the recent Opec+ supply cut – which angered Biden – and uncertainty in gas and refining markets caused by the war in Ukraine.
Ed Miliband, Labour’s shadow climate change and net zero secretary, said: “Today’s profits at BP are damning evidence of the failure of the government to levy a proper windfall tax.
“Rishi Sunak should be hanging his head in shame that he has left billions of windfall profits in the pockets of oil and gas companies, while the British people face a cost of living crisis.”
The BP finance chief, Murray Auchincloss, told the Guardian: “We recognise it’s a very difficult time for society and we understand people focus on our global profits, we get that … All we can do is pay our taxes and invest in Britain.”
Auchincloss declined to comment on whether any extension of the levy would harm investment. Prior to the introduction of the windfall tax the chief executive, Bernard Looney, said it would not affect its planned UK investments.
Jonathan Noronha-Gant, the senior fossil fuels campaigner at Global Witness, said: “Big fossil fuel firms making eye-watering profits is a slap in the face for the millions of citizens struggling to heat their homes, cook their meals or buy everyday essentials.”
Separately on Tuesday Russian state energy giant Rosneft urged BP to return to its operations in the country and promised more dividend payouts.
After the invasion of Ukraine, BP said it would sell its 19.75% stake in Rosneft and take a charge of up to $25bn.
“We can only heartily advise our colleagues from BP to remove the issue of exiting assets in Russia from the agenda and return to their native bosom,” Rosneft said.
The Russian company said that BP may “increase its earnings from the Russian business by another around $600m”.
BP will repurchase $2.5bn of shares after buying back $7.6bn so far this year. Looney was criticised after describing the company as a “cash machine” late last year.
Auchincloss said: “Our shareholders are individuals who have their pension or their savings in BP stock. A lot them will depend on the dividend we pay to meet their everyday bills. People come up to me in the street and talk about that all the time, about their appreciation … for that dividend.”
