Ineos Energy chief warns ‘punitive’ UK taxes make North Sea uninvestable

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Oil and gas explorers in the UK are operating with their “hands tied” behind their backs with the government’s “punitive” tax policy forcing them to look for opportunities in other markets, according to the head of Ineos Energy.

Ineos Energy, the four-year-old oil and gas arm of chemical group Ineos, said it had bought $3 billion of US assets rather than invest in the North Sea and would continue to look for deals overseas.

“In our original strategy we wanted to expand in the UK, particularly in gas. And what has happened is that the tax regime has made that impossible,” said Brian Gilvary, chairman of Ineos Energy and oil BP. former CFO.

The industry veteran described the current taxes on North Sea oil and gas, introduced by the then Conservative government and increased by Labor in the latest budget, as “the most unsustainable fiscal regime in the world”.

Gilvari said Ineos Energy had closed “a series of deals”. Great Britain after the Energy Profits Levy was introduced in 2022 in response to the spike in oil and gas prices that followed Russia’s full-scale invasion of Ukraine.

The current government raised the levy from 35 percent to 38 percent in October, creating a basic tax rate of 78 percent for North Sea oil and gas companies, and scrapped the 29 percent investment allowance.

“We’ve done three deals in the US and they came in pretty quick succession on the back of the EPL,” Gilvary said. Because the economics don’t add up when you have the alternative of moving that money to the Gulf of Mexico.”

“If you talk to anybody in the industry, everybody’s looking for a partner right now, but there’s nothing that we’ve looked at that we think we can move forward with just because of the prohibitive tax.”

US Apache last month announced plans to wind down its North Sea operations by 2029, blaming the UK’s tax regime on Shell and Equinor consolidated several of their UK assets new company to be more tax efficient.

“Every UK oil and gas producer is going to be looking outside the UK right now,” said Gilvari, whose company has negotiated a deal to buy a stake in a Gulf of Mexico field operated by Shell from China’s Cnooc International for an undisclosed amount .

“The frustration for players in the UK North Sea is that we’ve kind of tied our hands behind our backs because: [we cannot get] new licenses. So we can’t extend the life of what we have, even at these punitive tax rates. And so you end up in a second round.”

“Basically, we’ll try to extract assets as best we can and focus elsewhere,” he said.

Gilvary said the government “doesn’t want to get involved” in the North Sea fiscal regime, although he expected taxes would eventually be cut, but companies might not want to when that time comes.

The market value of Britain’s top 25 independent oil and gas companies fell from £27.8 billion in 2011, when oil averaged $110 a barrel, to £9.8 billion at the end of last year, when oil averaged $110 a barrel. was $80.to Deloitte as the sector steadily lost its appeal to UK investors.

Kosmos Energy, the New York-listed independent oil explorer, said this week it would not proceed with a proposed deal to buy Tullow, the West Africa-focused UK producer, which was valued at £14.5bn in 2012 , currently stands at £342m with net debt of $1.7bn.