Ineos owner Sir Jim Ratcliffe has accused the British government of taxing the North Sea oil and gas industry “to death” and warned that plans to spend up to £1bn upgrading key pipelines were at risk.
Ratcliffe, one of the UK’s richest men, accused the government of playing “primitive politics” when it introduced a windfall tax last year on North Sea producers, raising the tax rate from 40 per cent to 75 per cent, which he said threatened all future investment in the sector.
“Taxes are now so high that profits no longer fund future investments,” he said in a statement to the Financial Times, adding: “What the country needs is energy security, which means encouraging developments in our strategic energy reserves in the North Sea. There has been no thought given to the long-term consequences of this ‘tax it to death’ move.”
The government raised the tax rate on North Sea oil and gas producers last year to drum up cash as it spent billions shielding consumers from record gas prices and the related cost of living crisis following Russia’s full-scale invasion of Ukraine.
Since then, a number of companies have blamed the windfall tax for cutting back on investment. In March, Linda Cook, chief executive of Harbour Energy, the North Sea’s largest producer, said the levy had “all but wiped out profits” and said it would force her to shift investment away from the UK.
Ineos said the levy raised doubts about its plans to upgrade a key part of the UK’s energy infrastructure — the Forties Pipeline System — a network that carries almost one-third of the UK’s offshore oil and gas production.
David Bucknall, chief executive of Ineos’s energy division, told the FT that a “large chunk” of the £1bn has been invested since it bought the pipeline network from BP in 2017.
However, he warned that the full investment was in doubt unless the North Sea remained viable. “I think if the declines [in oil and gas production] continue as they are, then the business case won’t be there to make further investment.”
As well as operating the Forties network, Ineos has oil and gasfields in the North Sea and owns the Grangemouth refinery as well as a petrochemical site in Scotland.
Ratcliffe, who is a leading contender to take over Manchester United football club, said the “big winners” from higher UK taxes were companies in the US, where Ineos recently completed a $1.3bn deal to buy oil and gasfields.
Bucknall said Ineos would welcome a “price floor” on the windfall tax, a policy that is being discussed inside government and would scrap the levy should oil and gas prices fall below a certain level. He called on the government to develop a “balanced energy policy that recognises security of supply and affordability and a pace of transition that matches our ability to deliver it”.
In a statement, the government said the windfall tax would “fund £26bn in cost of living support from excess profits while encouraging investment in order to bolster the UK’s energy security”.
“We have been clear that we want to encourage reinvestment of the sector’s profits to support the economy, jobs, and our energy security, which is why the more investment a firm makes into the UK, the less tax they will pay,” it added.
Bucknall also hit out at plans by the opposition Labour party to cut the investment allowances built into the windfall tax. Labour, which is leading in the opinion polls ahead of an expected general election next year, declined to comment.