Owner Sir Jim Ratcliffe says the windfall tax imposed last year is ‘primitive.’ He also warns that investment in the country’s largest oil and gas pipeline system could be at risk.
Ineos’s Sir Jim Ratcliffe accused the British Government of taxing North Sea oil and natural gas industries “to death”. He also warned that plans for spending up to PS1bn on upgrading key pipelines could be at risk.
Ratcliffe, who is one of Britain’s wealthiest men, has accused the government playing “primitive political” by introducing a windfall-tax on North Sea producers last year, increasing the tax rate from 40% to 75%, which he says threatens all future investments in the sector.
He said that taxes are so high now that profits can no longer be used to fund future investments. “What this country needs is energy safety, which means encouraging the development of our strategic energy resources in the North Sea.” The long-term effects of this “tax it to death” move have not been considered.
Last year, the government increased the tax rate on North Sea gas and oil producers to raise cash while it spent billions protecting consumers from the record gas prices that resulted from Russia’s invasion of Ukraine and its cost of living crisis.
Since then, several companies have blamed windfall taxes for reducing investment. Linda Cook, CEO of Harbour Energy, North Sea’s biggest producer, , said that the tax had “all but erased profits” and would force her investment to leave the UK.
Ineos claimed that the levy cast doubt on its plans to upgrade the Forties pipeline system, a vital part of UK energy infrastructure. The Forties Pipeline System is a network which carries nearly one-third the UK offshore oil and natural gas production.
David Bucknall is the chief executive officer of Ineos’s energy division. He says that a “large chunk” of the PS1bn was invested since the company bought the pipeline system from BP in 2017.
He warned, however, that the investment would be in doubt unless North Sea was viable. “I believe that if [oil and gas production] continues to decline as it is, the business case will not be there for further investment.”
Ineos operates the Forties network and also owns oil and gasfields on the North Sea. It also owns Grangemouth Refinery and a petrochemical plant in Scotland.
Ratcliffe is one of the leading candidates for the Manchester United football team. He said that the “big losers” in higher UK taxes are companies in the US. Ineos, which recently bought oil and gas fields worth $1.3bn, was among the winners.
Bucknall stated that Ineos welcomes a “price ceiling” for the windfall tax. This policy is being within government. The levy would be scrapped if oil and gas prices fell below a specific level. He urged the government to create a “balanced” energy policy that takes into account affordability, security of supply, and pace of transition.
The government stated that the windfall tax will “fund PS26bn of cost-of-living support from excess profits, while encouraging investments to boost the UK’s security in energy”.
The more a company invests in the UK, they pay less tax.
Bucknall has also attacked plans by the Labour Party to reduce the investment allowances that are built into the windfall taxes. Labour, the party that is currently leading in opinion polls, ahead of a general election expected next year, declined comment.