Ineos owner Sir Jim Ratcliffe has accused the UK government of taxing the North Sea oil and gas industry ‘to death’ and warned that plans to spend up to £1billion upgrading major pipelines were threatened.
Ratcliffe, one of the UK’s richest men, accused the government of playing ‘primitive politics’ when it introduced a windfall tax on North Sea producers last year, increasing the tax rate of 40% to 75%, which he said threatened any future. investments in the sector.
“Taxes are now so high that profits no longer fund future investment,” he said in a statement to the Financial Times, adding: “What the country needs is energy security, this which means encouraging the development of our strategic energy reserves in the North Sea.There has been no reflection on the long-term consequences of this decision to “tax to death”.
The government raised the rate of tax on North Sea oil and gas producers last year to hoard cash as it spent billions to protect consumers from record gas prices and the global crisis. resulting cost of living following Russia’s large-scale invasion of Ukraine.
Since then, a number of companies have criticized the windfall tax for reducing investment. In March, Linda Cook, managing director of Harbor Energy, the largest producer in the North Sea, said the levy had “virtually wiped out profits” and said it would force her to move her investments out of the UK.
Ineos said the tax raised doubts about its plans to upgrade a key part of the UK’s energy infrastructure – the Forties Pipeline System – a network that carries nearly a third of oil production and UK offshore gas industry.
David Bucknall, chief executive of Ineos’ energy division, told the FT that a “big chunk” of the £1billion had been invested since he bought the pipeline network from BP in 2017.
However, he warned that the total investment was uncertain unless the North Sea remained viable. “I think if the decline [in oil and gas production] continue as they are, then the business case will not be there to make further investments. »
In addition to operating the Forties network, Ineos owns oil and gas fields in the North Sea and owns the Grangemouth refinery as well as a petrochemical site in Scotland.
Ratcliffe, who is a leader competitor to take over Manchester United soccer club, said the ‘big winners’ from rising UK taxes were companies in the US, where Ineos recently struck a $1.3 billion deal to buy oil and gas fields.
Bucknall said Ineos would welcome a ‘price floor’ on the windfall tax, an ongoing policy discussed in government and would remove the tax if oil and gas prices fell below a certain level. He called on the government to develop a “balanced energy policy that recognizes security of supply and affordability and a pace of transition that matches our ability to achieve it”.
In a statement, the government said the windfall profit tax would “fund £26bn of cost-of-living support from excess profits while encouraging investment to boost the UK’s energy security”.
“We have made it clear that we want to encourage the reinvestment of profits from the sector to support the economy, jobs and our energy security, which is why the more a business invests in the UK the less tax it will pay,” he said. he added. .
Bucknall also denounced opposition Labor plans to cut investment allowances built into the windfall tax. Labour, which leads opinion polls ahead of a general election due next year, declined to comment.
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