International Energy News: Shell moved rig .to avoid tax

Shell’s ill-fated attempt to tow an offshore oil rig from Alaska to Seattle in the final days of December was motivated by a desire to avoid $7m (£4.3m) of Alaskan state taxes, it emerged yesterday.

But the oil giant will instead suffer a multi-million dollar loss on the exercise after the rig ran aground off the Alaskan coast on Monday night.

The rig was beached during a violent storm on its way to a Seattle shipyard for routine maintenance, in a round-trip timed so that, thanks to an accounting loophole, Shell could avoid an Alaskan state tax.

However, because the rig ran aground late on New Year’s Eve and began 2013 within three miles of the Alaskan coast, Shell remains liable for a unique state property tax on equipment dedicated to oil and gas development and exploration.  Shell admitted yesterday that its decision to move the rig, the Kulluk, just weeks after it was brought to the Gulf of Alaska in November, was motivated by financial considerations.

“It’s fair to say that the current tax structure related to vessels of the type influenced the timing of our departure. It would have cost Shell multiple millions to keep the rigs here,” a Shell spokesman said.

Another Shell spokesman, in London, said: “While we are aware of the tax environment wherever we operate, the driver for operational decisions is always governed by safety. In this case, what mattered most to Shell was the two-week window of favourable weather that was forecasted for that journey.”

He denied suggestions that the routine maintenance and inspection could have been carried out in Alaska.  David Gregory, a councillor for the city of Unalaska, said Shell’s equipment tax bill would come to between $6m and $7m, adding: “Maybe they should have just stayed there.”

Source: Caye Global News, Gulf Times.

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