The North Sea Forties Pipeline of Jim Ratcliffe will be closed 10 years earlier than planned

Ineos chief warns that oil tax raids and drilling restrictions could’suffocate’ the industry. A North Sea pipeline system that is vital to the economy could be closed a decade sooner than expected due to ‘s tax raid. According to its CEO, the Forties Pipeline System could be shut down by 2030 due to Labour’s policies on oil and gas taxes that will “suffocate the industry”.

The pipeline is part of Sir Jim Ratcliffe’s Ineos, and it allows 29pc and 30pc respectively of UK oil and gas to reach its customers. It was expected to continue running until mid-2040. The daily oil flow has fallen from 1m barrels a day down to just 200,000. This is set to continue to drop as the Labour tax raids and drilling restrictions cut offshore platform output.

The system could become uneconomical much earlier than expected if the decline is as anticipated. Andrew Gardner, chief executive officer of Ineos Forties Pipeline System said: “Back then, we told our employees and customers that we would operate [until] at least 2040, as the hydrocarbons in the ground were sufficient to keep the oil and natural gas flowing. If Labour’s tax policies prevent our customers from offsetting drilling and other investments costs against tax, volumes will shrink. We’re looking more at 2030-35 for a likely end date.

Ineos Forties Pipeline System is the owner and operator of the 500-mile network of hubs, pipes and other infrastructure connecting oil and gas platforms scattered around the UK’s North Sea with the mainland.

The company purchased the pipelines in 2017 from BP and committed to invest £500m so that it can run until 2040. The Government’s plans for reducing capital and investment allowances could mean that the system is decommissioned instead.

Ineos announced recently that it plans to close the Grangemouth refinery , in Scotland, in early 2025. This will result in hundreds of job losses. Forties Pipeline System’s 500 employees may also be affected. Environmentalists will cheer the closure of oil and gas infrastructure, and the government sees it as a step necessary to reach net zero.

This deindustrialisation, however, has angered both the communities that have been affected and some of Labour’s union bosses. Gary Smith, the general secretary of GMB, the powerful union that represents many offshore workers said: “Successive government have taken an hostile and fundamentally dishonest stance on the reality of oil and natural gas. Oil and gas will be needed for many decades.

From a Labour point of view, it is counterproductive to tax the industry out-of-business and ban new exploration. You are going to cause a cliff edge for the industry, which will have disastrous implications.

Sir Jim, the billionaire , supported Sir Keir in the lead up to the elections, but he attacked Labour’s North Sea Policy during the election campaign, saying it would tax UK oil and gas “out of existence”.

A spokesperson for Sir Jim stated this weekend that the UK had invested billions of dollars in North Sea infrastructure, which has continued to benefit the UK economy and society as well as the Exchequer.

It is impossible that Labour’s policies would burn them in an instant. It’s throwing away valuable technologies and the skilled workers needed to meet current energy needs, as well as to transition to a low-carbon future.”

Ed Miliband has promised to strip most of the investment and capital allowances in the energy sector by November.

All businesses are eligible for such allowances, but the oil industry is particularly important, as it incurs enormous costs in exploration, installation and decommissioning, some of which can last decades.

Many businesses would not be viable without these tax breaks.

Mr Gardner stated: “I am afraid that, if Labour removed these allowances, annual output drops would accelerate from 5pc up to 15pc and volumes flowing through [the Forties Pipeline System] would shrink even further.”

Profits are already down. In 2019, Ineos announced that it would invest £500m to extend the pipeline’s life by 20 years and support North Sea oil production until 2040. The profits were down to £37m in 2022, and the largest expenditure is expected to be the decommissioning of the system at some point during the early 2030s. Michelle Thomson, SNP member of the Scottish Parliament from Grangemouth said that the threat to the Forties is another blow to an area already damaged.

She stated: “Too few politicians understand the industry.” Westminster has been taking oil and gas tax revenues for granted without understanding long-term investment and the impact of tax changes on critical infrastructure. “Grangemouth has already been rocked by the news of the closure of the refinery.” This latest warning is dispiriting because the entire area risks losing skilled labour and jobs.

Mike Tholen, sustainability and policy director of Offshore Energies UK (the trade body for oil-and-gas operators), said: “Operators know the risks of losing infrastructure early and are working with policymakers and regulators.” We have warned about the £13bn loss in economic value that improper changes to the tax regime will cause for oil and gas production, and future energy infrastructure.

Treasury was asked to comment.

The Forties pipeline system was built in 1975. It runs 110 miles along the seabed, between BP’s Forties oilfield and Cruden Bay off Scotland’s east coast.

Since then, in the past 50 years, many new oil fields on the North Sea have been discovered and plumbed to the same Forties pipe. The system is now used by up to 80 offshore platforms, and without it they would be forced to close.

Around 1999, it reached its zenith, transporting 1m barrels per day. By 2019, that number had dropped to 400,000.