Ineos founder and chairman Jim Ratcliffe said he fears for the future of the North Sea in a statement sent to Rigzone.
According to the statement, Ratcliffe told his Forties pipeline system business that the UK government’s 75 percent windfall tax on North Sea oil and gas producers will cause a collapse in investment in the basin
“The UK has increased its North Sea tax take from 40% to 75% and we are now seeing many operators pause or cancel their investment plans,” Ratcliffe said in the statement.
“The big winners are in the United States, where operators in the Gulf of Mexico can only pay 37% tax and investment is at its highest level for a decade,” he added.
“The UK governments so called ‘extraordinary tax’ is really primitive policy. No thought has been given to the long-term consequences of this “tax him to death” move. Taxes are now so high that profits no longer fund future investment, and further new investment has poor returns with consistently high tax rates,” Ratcliffe continued.
Ratcliffe went on to point out that what the country needs is energy security, which he said “means encouraging the development of our strategic energy reserves in the North Sea, not taxing it and closing the basin”.
The statement notes that the Forties pipeline system links more than 85 fields in the North Sea and gives Ineos a unique insight into the development plans of the oil and gas operators working there. He highlighted that Ineos FPS is currently investing up to $1.24 billion (GBP 1 billion) to upgrade the network “to ensure it remains fit for purpose well into the 2040s”, but warned that ” that depends on the basin remaining a viable oil and gas hub.” .
When Rigzone asked HM Treasury for a comment on the statement, a government spokesman said: “The Energy Profits Levy helps fund $32.33 billion (GBP 26 billion) in cost of living support from profits excessive while encouraging investment to strengthen the UK’s energy security.” .
“We’ve been clear that we want to encourage the reinvestment of profits from the sector to support the economy, jobs and our energy security, so the more a business invests in the UK, the less tax it pays,” he said the spokesperson added
In a policy paper published on its website on March 15, the UK government highlighted that the Energy Profits Levy was introduced from May 26 last year “to tax the exceptional profits of companies oil and gas companies operating in the UK and the UKCS”.
“To maintain the incentive for companies to invest in oil and gas production to support the UK’s energy security, the EPL included a[n] … 80 percent rebate against tax based on investment expenditure,” the policy paper stated.
The levy was due to expire on 31 December 2025, but in the Autumn Statement the UK Chancellor of the Exchequer announced changes to the Energy Profits Levy, including an extension to 31 March 2028 , according to the document.
Other changes include an increase in the rate from 25% to 35% and the reduction of the investment allowance rate to 29% for all non-decarbonisation investment expenditure, the document highlighted .
The chancellor also announced that from 1 January 2023 qualifying investment expenditure for upstream decarbonisation will be eligible for a higher expenditure allowance of 80 per cent, instead of the endowment of 29 percent, the document notes.
In February 2019, Ineos revealed it would invest $1.24 billion (GBP 1 billion) in the UK, including $622.4 million (GBP 500 million) in the Forties pipeline system, $435.9 million (GBP 350 million) in Grangemouth on a new energy plant, and $186.69 million (GBP 150) to build a 300,000 tonne/year vinyl acetate monomer plant.
“Ineos is a supporter of British manufacturing and this $1.24 billion (GBP 1 billion) investment underlines our confidence in our UK business,” Ratcliffe said in a company statement at the time.
“These investments will ensure that our UK assets remain world-class for many years to come,” Ratcliffe added in the statement.
To contact the author, please send an email andreas.exarcheas@rigzone.com
