Siccar Level Power: Cambo oilfield developer criticized for tax haven standing

THE main developer behind the controversial Cambo oil field, northwest of the Shetland Islands, ultimately owns an offshore tax haven that one expert claims could rob the UK of tens of millions of pounds.

The Ferret can reveal that Siccar Point Energy, which has a majority stake of 70% in the proposed Cambo development, is owned by a Luxembourg-registered “ultimate parent company”.

Luxembourg is ranked sixth among the worst in the world by the Tax Justice Network campaign group on both tax avoidance and financial secrecy. There is no evidence that Siccar’s use of the tax haven is illegal.

However, environmentalists argued that Siccar’s Luxembourgish ownership “destroys any claim that Cambo is important to the economy” and labeled the company as “greedy”. Opposition politicians attacked “tax-avoiding profiteers” and called for Cambo to be canceled.

READ MORE: Boris Johnson Needs To Show Some Courage And Cancel Cambo Oil Field Plans

Siccar Point Energy stressed that it was a UK company with wholly UK resident assets and was therefore subject to “full UK taxation”. The company had adhered to “relevant tax law”, operated “efficient tax planning”, but not “artificial or aggressive tax planning”, it said.

Conflicts over Cambo in Scotland and the UK have moved high on the political agenda in recent weeks. Activists believe Britain’s climate change credibility will be undermined in the run-up to the COP26 international summit in Glasgow in November by agreeing to extract more oil from the site.

The Cambo oil field is 125 kilometers northwest of Shetland and is estimated to contain around 800 million barrels of crude oil. According to environmentalists, if it were mined and burned, it would cause ten times more climate emissions than Scotland as a whole annually.

The UK government’s oil and gas agency is set to decide by the end of 2021 whether to give the go-ahead for production. If approved, the first oil could be produced in 2025, with initial production expected to last 25 years.

According to Siccar’s 2020 annual report, the “immediate parent company” is Siccar Point Finance Limited, registered in the UK. But the last line of the report added: “The ultimate parent company of the company is Siccar Point Luxembourg SCA, a company registered in Luxembourg.”

The Tax Justice Network has calculated that Luxembourg, through its function as a tax haven, withholds £ 20 billion in tax revenue from other countries every year. This corresponds to the annual salary of more than two million nurses.

The private finance think tank of the European Services Strategy Unit estimated that Siccar could save “tens of millions of pounds” in taxes by being based in Luxembourg. The “financial flows” would be through Luxembourg rather than the UK, said Dexter Whitfield of the unit.

He added, “The parent company’s presence in a tax haven means the flow of profits, interest payments, supply chain contracts and even some employment contracts are channeled through Luxembourg, resulting in a loss of UK tax revenue. This will make it more difficult to get local orders and jobs. ”

“This is very different from a parent company in Scotland and a subsidiary in Luxembourg. This situation will lead to more secrecy and trade secrecy, which will lead to a further erosion of democratic accountability. ”

Friends of the Earth Scotland (FoES) warned that Siccar’s tax haven “continues to destroy any claims that Cambo is important to the economy”. The climate could not afford the “devastating” pollution, said Caroline Rance, an activist with the environmental group.

“The UK government already has one of the weakest tax systems on oil and gas, but these greedy corporations simply cannot help themselves by seeking more profit at the public expense,” she told The Ferret.

“The scandalous reality is that these tax evaders are already receiving millions of pounds in public money as subsidies that promote their climate-damaging activities while failing to pay their fair share of taxes.”

SICCAR reported a profit of £ 117 million ($ 161 million) in 2018, £ 29 million ($ 40 million) in 2019 and a loss of £ 76 million ($ 106 million) in 2020 due to the plunge in oil prices. In 2019, Cambo stated that “will drive the company’s long-term growth and benefit all of the company’s stakeholders”.

The company bought Cambo in 2017 and sold a 30% stake in Anglo-Dutch oil giant Shell in 2018. Siccar expects a total of around £ 1.9bn to be invested in Cambo, with £ 140m already invested in the project.

Shell has also come under fire in the past for its tax regulations. In December 2020, Reuters reported that the company had paid more than $ 1.96 billion in 2018 and 2019.

Reuters estimated that if Shell had booked these profits through its headquarters in the Netherlands, the company would have a tax liability of $ 507 million.

CNN reported that Shell would typically expect a 20-25% return on investments like Cambo. This indicated that development by 2050 would generate a profit of between $ 380 million and $ 475 million.

Scottish Greens co-chair Patrick Harvie MSP was not surprised that Britain’s “ruthless expansion of fossil fuel production is being carried out by tax-avoiding profiteers. It is precisely for this reason that building a greener Scotland is not just about taking control of energy policies, it is about creating another type of economy that does not allow the super-rich to hoard vast amounts of wealth at the expense of offshore every body else.”

Scottish Labor finance spokesman Paul Sweeney MSP said the ferret reveal was “a reminder that leaving the fight against climate change in the hands of market forces is a strategy that is doomed to fail” .

If it moves on, Cambo would be the UK’s first major new fossil fuel project since the International Energy Agency warned in May that no new oil, coal or natural gas projects should be launched if the world hits its net zero goal aims to have climate emissions by 2050.

A decision on the project will also be made in the course of the sixth report on climate science, which was published on August 6 by the United Nations Intergovernmental Panel on Climate Change. He warned of a “code red for humanity”.

Hosting the UN flagship climate change conference COP26 in November, both the UK and Scottish governments have come under heavy pressure to block Cambo’s development.

The COP26 summit is widely referred to as the world’s last chance to reach an agreement that could minimize the worst effects of the climate emergency.

Greenpeace has threatened legal action if the UK government approves Cambo. Friends of the Earth has filed a petition with 80,000 signatures on Downing Street demanding that Prime Minister Boris Johnson reject the proposal.

Johnson told reporters that Westminster “cannot simply dissolve contracts,” presumably referring to the first exploration license Cambo was granted in 2001. However, critics pointed out that a license for the actual start of oil production has not yet been agreed.

First Secretary Nicola Sturgeon wrote to Johnson on Aug. 12, asking the UK government to “reassess” licenses for new oil and gas projects “where field development has not yet begun”, including Cambo.

She also called on the UK government to significantly improve “climate conditionality” in connection with future oil and gas production. Nonetheless, Sturgeon was attacked again by environmental groups and opposition politicians for failing to take a clear public stance against Cambo.

Siccar Point Energy stressed that it paid taxes in the UK.

A company spokesperson told The Ferret: “Siccar Point Energy is a UK company with wholly UK based assets. As such, it is subject to full UK taxation.

“Cambo’s development will make a positive contribution to the UK economy by creating 1,000 new direct jobs in the UK and thousands more in the UK supply chain, and by reducing the UK’s dependence on imported energy.”

According to its website, Siccar “supported the UK energy transition through sustainable UK production”. An online statement described the company’s tax policy as “principled, transparent and sustainable”.

It added, “We comply with applicable tax law and our priority is timely and full compliance. We operate efficient tax planning that supports our business and reflects commercial and economic activity. We do not participate in artificial or aggressive tax arrangements. ”

SICCAR is based in Aberdeen and has a registered office in Leeds. In 2020 it employed 38 people and, in addition to Cambo, was involved in eight large North Sea oil fields.

The company is named after the Siccar Point geological formation on the east coast of Scotland, where Scottish geologist James Hutton found definitive evidence for his groundbreaking theory of the earth.

The company’s website states that Hutton’s work was inspired by “evidence-based and contrary thinking,” which the company sees as “no better inspiration for an exploration and manufacturing company seeking value under the waves of the North Sea.”

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Shell said it was “tax compliance” in all “countries and locations where we have a taxable presence.”

A company spokesperson said, “Where Shell companies operate in low-tax areas, they are there for commercial and material reasons, and those companies benefit from the local tax regime.

“We are committed to complying with the applicable tax laws of all countries in which we operate. The principle of the Organization for Economic Co-operation and Development is that profits should be taxed in the countries in which the economic activities take place. ”

The development of Cambo was supported by Oil and Gas UK, the trade association for the offshore industry. It was “part of a low-carbon journey that will support the energy security, jobs, the economy and the net-zero future everyone wants to see,” said CEO Deirdre Michie.