North Sea tax change to end drillers' 20-year tax holiday

|By:, SA News Editor

A planned change in the way the U.K. taxes North Sea drillers exposes the loophole in a system that allowed the industry to pay almost no corporate taxes for two decades, legally and with the consent of Britain's tax authority, according to a Reuters analysis of company accounts, shipping registers and other company statements.

Companies that have benefited from the current rules include Ensco (ESV), Rowan (RDC) and Transocean (RIG), which collectively accounted for 60%-plus of the U.K. market in 2012; the main British operating units of the three companies reported combined U.K. revenues of $11.8B during 1993-2012, while their combined tax charge was $70M.

The amount of money the government expects the tax change to raise is equivalent to ~5% of total rig market revenues, which would have raised an additional ~$600M from the three companies alone over the last 10 years.