North Sea oil: UK’s ‘primitive’ windfall tax will drive North Sea drillers to the US, billionaire businessman Sir Jim Ratcliffe warns

Sir Jim Ratcliffe says the US has been the big winner from the UK’s higher windfall tax

Britain’s richest man has blasted Westminster’s “primitive politics” on fossil fuels, warning its windfall tax on oil and gas giants will drive an exodus of drillers from the North Sea.

Billionaire businessman Sir Jim Ratcliffe, chief of petrochemicals firm Ineos, said the UK Government’s 75 per cent tax rate on fossil fuel producers would lead to a collapse in investment in the basin, driving them elsewhere – namely to the US.

“The UK has hiked the tax take in the North Sea from 40 per cent to 75 per cent and we are now seeing many operators pausing or cancelling their investment plans,” he told his Forties Pipeline System (FPS) business.

“The big winners are in the US, where operators in the Gulf of Mexico can pay just 37 per cent tax and investment is at its highest level for a decade.”

The so-called windfall tax was applied to oil and gas firms after events beyond their control – namely the Covid pandemic and instability caused by Russia’s invasion of Ukraine – led to record profits for companies.

The UK now imposes three taxes on operators – a 30 per cent corporation tax, a 10 per cent supplementary charge and a new 35 per cent energy profits levy. Together these amount to some of the world’s highest taxes on the oil and gas sector.

However, a ‘loophole’ in the rules means companies can claim back 91p in tax for every £1 invested in fossil fuel extraction.

The Forties Pipeline System transports oil and gas from the North Sea to the Ineos refinery and petrochemical complex at Grangemouth. Picture: Jeff J Mitchell/Getty Images

Sir Jim, who has an estimated net worth of around £13 billion, said the UK’s taxation system was prompting businesses to reassess investment plans, with many choosing to abandon new developments.

He said lots of money that had been scheduled to go into the North Sea was being switched to the US, where tax rates are typically between 35 per cent and 39 per cent and oil and gas investments are booming.

“The UK Government’s so-called windfall tax is really primitive politics,” he said. “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, which operates oil, chemical and power plants at Grangemouth in central Scotland, is the world’s fourth-largest chemical company and is responsible for the biggest share of Scotland’s total greenhouse gas emissions. Ineos is investing up to £1 billion upgrading the Forties Pipeline network, which it acquired in 2017.

The 235-mile system carries 575,000 barrels per day from North Sea producers to its Kinneil processing facility at Grangemouth, delivering almost 40 per cent of the UK’s North Sea oil and gas production. It is considered a UK strategic asset.

But the company stressed the investment would be dependent on the basin remaining a viable oil and gas hub. “In the UK we have seen perpetual tinkering with tax rates and now a massive tax hike,” Sir Jim said.

“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.”