ONE of Britain's richest men, who owns the huge petrochemical site at Grangemouth warned that the North Sea is being 'taxed to death' because of the severity of UK windfall taxes.
Sir Jim Ratcliffe, the 70-year-old boss of Ineos, who is a front-runner in a a bid for Manchester United, has said that the government’s 75% windfall tax on oil and gas producers in the North Sea will lead to a collapse in investment.
Mr Ratcliffe's Ineos business owns the Forties oil and gas pipeline, the 310-mile long system transporting about 40% of North Sea oil and gas to shore.
He said the tax rate applied to North Sea output means industry investment is now only meaningfully flowing in the direction of the United States.
He spoke out as Ineos raised doubts about a £1bn upgrade to the Forties system.
The UK now imposes three taxes on operators, a 30% corporation tax, a 10% Supplementary charge and a new 35% Energy Profits Levy.
There have been industry warnings that businesses are reassessing their investment plans with many deciding not to proceed with new North Sea developments.
Harbour Energy, the North Sea’s largest producer strongly criticised the levy saying it was the main reason for it cutting hundreds of jobs in Aberdeen.
The government introduced the energy profits levy (EPL) last year in a bid to tap the benefits of record prices companies were enjoying after Russia began its war in Ukraine.
The idea was to get back some of the taxpayers' money spent on energy support schemes for households and businesses while maintaining incentives to invest to bolster UK energy security.
But Mr Ratcliffe, along with counterparts at other firms which have cut jobs in response, are arguing that the tax rate is too punitive.
The billionaire said: “The UK has hiked the tax take in the North Sea from 40% to 75% and we are now seeing many operators pausing or cancelling their investment plans. The big winners are in the US where operators in the Gulf of Mexico can pay just 37% tax and investment is at its highest level for a decade.
"The UK government's 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.”
The Forties pipeline system, which carries the equivalent of 575,000 barrels per day from 85 fields to its processing facility at Grangemouth, is currently seeing investment of up to £1bn, Ineos said.
It added that the network was being upgraded to "ensure it remained fit for purpose until the 2040's".
But the group said that the money was dependent on the North Sea basin remaining a viable oil and gas hub.
Mr Ratcliffe added: “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.”
Last month, the UK government faced a legal challenge over "reckless" plans to award more than 100 new licences for North Sea oil and gas exploration in a court bid to stop proposed fossil fuel production.
Campaign group Greenpeace went to the High Court to halt the sanctioning of a new licensing round and block the further exploration.
They have already written to UK ministers explaining the grounds on which they consider the latest offshore oil and gas licensing round to be unlawful.
They call for the decision to award the new licences to be reversed, arguing that new oil and gas exploration and development is incompatible with the UK’s own rules and international climate obligations.
Three weeks ago the United Nations secretary general António Guterres’ in warning of the climate emergency said that climate activists are sometimes depicted as "dangerous radicals". But he said the "truly dangerous radicals are the countries that are increasing the production of fossil fuels".
It came as the Intergovernmental Panel on Climate Change (IPCC), made up of the world’s leading climate scientists, delivered a "final warning" on the climate crisis, as rising greenhouse gas emissions take the world to the brink of irrevocable damage that only swift and drastic action can avert.
Since Russia’s invasion of Ukraine last year, which threw energy markets into turmoil, the British government has become more enthusiastic about issuing new North Sea oil licences in order to maintain energy security by boosting domestic supply.
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