Sir Jim Ratcliffe, Founder and Chairman of INEOS has told his Forties Pipeline System (FPS) business that the government’s decision to impose a 75% windfall tax on North Sea operators threatens investment in the whole basin.
The UK now imposes three taxes on operators, a 30% corporation tax, a 10% Supplementary charge and a new 35% Energy Profits Levy. Businesses across the basin are reassessing their investment plans and many are deciding not to proceed with new North Sea developments.
A lot of the money that was scheduled to go into the North Sea is being switched to the USA where the tax rates are typically between 35% and 39% and where oil and gas investments are booming.
Sir Jim says, “The UK governments so called “windfall tax” is really primitive politics. There has been no thought given to the long-term consequences of this ‘tax it to death’ move. Taxes are now so high that profits no longer fund future investments and on top of this, new investments have poor returns with invariably high tax rates.”
INEOS FPS is currently investing up to £1 billion upgrading the network to ensure it remained fit for purpose until the 2040’s but this is dependent on the basin remaining a viable oil and gas hub.
The INEOS Forties Pipeline System carries 575,000 barrels per day from 85 fields over 169 kilometers to its Kinneil processing facility at Grangemouth. It is so important to the UK that it is considered a UK strategic asset.
Sir Jim adds, “In the UK, we have seen perpetual tinkering with tax rates and now a massive tax hike. What the country needs is energy security, which means encouraging developments in our strategic energy reserves in the North Sea, not taxing it out of existence and shutting down the basin.”
