BRITAIN’S biggest oil company, BP, is this week expected to announce record pre-tax profits of more than £13.5 billion.

The profits, which have risen by almost 50% compared with 2003, will trigger a pay and bonus package worth an estimated £5m for Lord Browne, the company’s chief executive, who was given a life peerage by Tony Blair in 2001.

City experts are betting that the firm will break the British record for annual profits, currently held by Shell, and will close in on the world record held by Exxon Mobil.

The company has drawn up plans to reward its top executives with even higher pay packages over the next few years. In future the company will seek to rival the higher pay packages traditionally offered by American firms.

It is also planning to replace its current executive pay scheme, which awards directors with share options, with a new system that will be based largely on cash bonuses.

Companies have traditionally sought to pay their executives with shares to ensure that their pay packages are closely aligned with their shareholders’ interests.

BP’s record profits, equivalent to £37m a day, are expected to stoke a backlash from consumers, trade unions and MPs after Shell last week announced that it had also enjoyed a record year in 2004, even though the company is still in turmoil over its lack of oil supplies.

BP has developed a different method of calculating profits that allows the firm to announce a lower level of profits — of about £8.2 billion — to dampen criticism. However, the pre-tax profit figure of more than £13.5 billion is the standard measure used in the City and watched by stock market experts. Browne was forced to admit in a recent interview with The Sunday Times that the amount of cash being generated by BP was “staggering”.

Last week Martin O’Neill, chairman of the Commons trade and industry select committee, said that the government should consider imposing a windfall tax on oil companies. The price of petrol has remained above 80p a litre throughout much of the past year and Shell and BP’s involvement in the gas market is also under scrutiny.

“We need to look very carefully at the make-up of these profits to see if they have benefited from the rise in oil and gas prices in the UK,” O’Neill said.

Tony Woodley, general secretary of the Transport and General Workers’ Union, described oil company profits as “more than excessive” and “obscene”.

Oil executives are privately furious at the criticism and their companies are threatening to move abroad if a windfall tax is introduced. The government has said that it has no plans to do so.

A senior oil company executive pointed out that Shell and BP contribute an estimated £13 billion to the exchequer. “The government is already getting a lot of extra money in taxes from the rise in oil prices. We are not like an ex-nationalised industry which was sold off cheap; we are a global business and if they hit us we would just move elsewhere,” he said.

He also dismissed calls for oil firms to make a large voluntary contribution to good causes from their profits. “Why should oil companies take over the role of government — we get taxes taken off like everyone else,” he said.

The BP announcement will be welcomed in the City where the company is admired for its long-term plans to cope with the problem of dwindling North Sea oil supplies. oBarclays Bank will unveil a 20% rise in its annual profits to more than £4.5 billion on Thursday. The announcement will anger MPs who last week criticised high street banks for offering consumers a poor deal.

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