Ineos Energy Warns UK Windfall Tax Makes North Sea Investment Impossible

The UK windfall tax on North Sea oil and gas operators has made economics in the basin impossible for companies to invest, according to Brian Gilvary, the chairman of Ineos Energy.

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“In our initial strategy we wanted to expand in the UK, particularly gas. And what has happened is that the tax regime makes that impossible,” Gilvary told the Financial Times, commenting on the prospects of the oil and gas arm that UK-based chemicals group Ineos created four years ago.

The UK windfall tax, which was initially introduced by the previous Conservative government in 2022 and was later raised and extended by the current Labour government, has put off many companies from making new investments in the UK North Sea.

The tax is “the most unstable fiscal regime in the world,” Gilvary, a former chief financial officer at BP, told the Financial Times.

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Due to the regulatory burden and instability, Ineos Energy has passed up a “series of transactions” in the UK, the executive said.

“The economics don’t stack up when you have the alternative to move that money to the Gulf of Mexico,” Gilvary told FT.

Ineos Energy has just announced a deal to buy the U.S. Gulf of Mexico business held by China’s CNOOC.

This was the third major recent investment by Ineos in U.S. oil and gas, following an LNG supply deal with Sempra Energy in 2022 and the acquisition of Chesapeake Energy’s oil and gas assets in South Texas a year later.

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Ineos Energy and many other companies are looking to expand in jurisdictions other than the UK North Sea, due to the windfall tax, officially known as the Energy Profits Levy (EPL). The tax was raised to 38% from 35%, effective November 1, 2024, and extended by a year to 2030.

Many companies have been studying shrinking their British operations. The uncertain regulatory framework of the past two years has driven investments away from the basin, the industry says.

Last month, U.S. oil producer Apache said it plans to cease oil production at its assets in the UK North Sea by 2030, due to the windfall tax.

By Tsvetana Paraskova for Oilprice.com

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