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Financial Times: Alaskan oil tax rise sparks BP review

By Dino Mahtani
Published: December 28 2007 02:00 | Last updated: December 28 2007 02:00

BP, Europe’s second-largest oil company, will review its investment plans in the US state of Alaska following legislation to increase taxes on oil producers there.

The move by the state government is a blow to all oil companies doing business in one of the most important oil provinces in the US, the world’s third-largest oil producer.

But it is also another piece of bad news for BP which is still under investigation by state officials for last year’s oil spill in Prudhoe Bay, Alaska, for which the company has already paid $20m in fines.

Sarah Palin, Alaska’s Republican state governor, last week signed the proposed tax increase into law, boosting levies on the net value of oil from 22.5 per cent to 25 per cent.

The state government expects to raise $1.5bn (£752m) in revenues next year from the measure.

Oil executives say the change will almost certainly cause a disruption to investment plans.

Doug Suttles, president of BP Exploration Alaska, said he was “disappointed” by the move and hoped the government would reconsider the tax increase once the impact of the measure became clear.

“This massive tax increase will weaken investment in Alaska’s oil fields at the very time that more investment is needed . . . this will impact our business plans in 2008,” he said.

The tax increase is the latest blow to international oil companies, which have seen their assets come increasingly under threat by governments looking for a greater share of oil revenues.

Despite Alaska’s importance to the US oil in dustry, local opposition has intensified following allegation of corruption and bribery.

This year, two former Alaskan lawmakers were convicted of accepting bribes from oil executives working for Veco, an oilfields servicing company.

Oil companies have also been criticised by local politicians for not doing enough to safeguard the environment.

This month Alaskan government officials began investigating a small oil spillage from a pipeline operated by ConocoPhillips. *Royal Dutch Shell, Europe’s largest oil company, has bought a 55 per cent stake in a Chinese coalbed methane project, near its joint gas project with PetroChina. The stake was bought from the Verona Development Corp for an undisclosed sum.

The deal covers a 30 year production sharing contract for the North Shilou Block, a 1015 square kilometre area where production is expected to start in 2015.

China has the world’s third largest coalbed methane reserves in the world after Russia and Canada and is keen to exploit them as part of plans to use less environmentally damaging fuels.

The government in September decided to allow more companies to co-operate with foreign companies in the coalbed methane sector.

Copyright The Financial Times Limited 2007

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