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Oil: Soaring BP profit of £6.7bn draws fire from unions and motoring lobby logo

Oil: Soaring BP profit of £6.7bn draws fire from unions and motoring lobby

· Rising price of oil boosts first half earnings by 23% 
· Call for windfall tax on £37m a day income

BP truck 

Photograph: Gareth Fuller/PA

BP was under fire at home and abroad yesterday after reporting a 23% jump in first half profits to $13.4bn (£6.7bn) on the back of soaring oil prices and a strong performance from its endangered Russian joint venture, TNK-BP.

The company, which has been at war over recent months with private shareholders in Moscow, found British trade union leaders calling for a windfall tax on its £37m a day income and motoring organisations criticising its high pump prices.

BP said the vast bulk of its profits came from its exploration and production (E&P) operations and that it made only a “few pence per litre” at the dwindling number of its chain of petrol stations it controls in Britain.

“We made over $10.7bn over the second quarter from upstream (E&P) worldwide with only $539m from refining and marketing [which includes petrol sale],” said a spokesman.

Tony Woodley, joint leader of the Unite union, said the boardrooms of energy companies should face windfall taxes because they “picked the pockets of the poor and needy”.

Neil Greig, director of the Institute of Advanced Motorists Motoring Trust, an independent road safety organisation, added that “many will find it hard to accept the continued huge profits being made”.

BP said the improved financial performance showed that changes made to the business after the Texas City explosion and other problems in the US were paying off.

Chief executive Tony Hayward explained: “I said in February that 2008 should see operational momentum building across our businesses, feeding through into financial momentum in the second half of this year and into 2009. That’s what we are seeing.”

He was delighted that TNK-BP had contributed more than $2bn to the $20bn of first half profits in the exploration and production business and 25% of BP’s global production volumes but admitted he could not be sure how the bust-up with the group’s Russian partners in TNK-BP would be resolved.

“We will not be intimidated by strong-arm tactics. We cannot be sure how things will pan out in Russia, but I can tell you that we’re committed to trying to find a solution that’s acceptable to all parties,” he said. The BP boss believed the harassment of TNK-BP officials, including its chief executive, Robert Dudley, who has fled the country, was not Kremlin-inspired. But he said it was wrong for Russia to believe it could play by one rule at home and another abroad.

BP’s overall half-year figures were strong but the second-quarter replacement cost profits of $6.5bn were up only 6% on the same quarter last year as BP took a $1.7bn hit from “non-operating items and some accounting adjustments”. Without this correction the profits would have been even larger. BP shares fell 13.25p to 506.25p despite the “turnaround” figures which come after a period in which the business has badly under-performed most of its rivals owing to some operational problems in the US that predated the latest difficulties in Russia.

Richard Hunter, head of equities at City stockbroker Hargreaves Lansdown, said the “exceptionally strong numbers” in the first half of the year followed a good first three months.

“Given the tailwind of historically high energy prices, this is somewhat to be expected, although such a strong successive quarterly performance could signal a marked turnaround in the group’s fortunes,” he added.

The figures come as BP goes through yet another bout of turbulence that has characterised the past two years and led to its share price being marked down despite very high crude prices. The difficulties in Russia follow earlier problems in America, where BP was hit by the Texas City refinery explosion, pipeline fractures at the Prudhoe Bay field in Alaska and allegations of irregular propane trading.

Well of troubles

· The Texas City refinery explosion in March 2005 killed 15 workers and dealt a huge blow to the company’s reputation. An investigation uncovered widespread safety lapses.

· Pipeline fractures at Prudhoe Bay in March 2006 spilled 200,000 gallons of oil into the Alaskan wilderness.

· In 2007, BP paid $300m to head off charges of price-fixing in the propane market in 2004.

· Lord Browne quit as chief executive in May last year after lying in court about his private life, prompting his replacement by Tony Hayward.

· The head of BP’s Russian joint venture TNK-BP blamed a “campaign of harassment” for his departure from Moscow last week, calling the highly profitable asset’s future into question.

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