The Forties Pipeline System, part of Sir Jim Ratcliffe’s Ineos business empire, may have to close in six years, well ahead of schedule, as Labour’s North Sea tax and licensing policies risk making the network financially unsustainable.
Andrew Gardner, chief executive of system, said that previously he had told his customers and workforce that the system would “operate until 2040 or beyond, because the amounts of hydrocarbons still left in the ground meant the oil and gas would keep flowing”, as reported by several UK media outlets.
However, if “Labour’s tax policy stops our customers offsetting their drilling and other investment costs against tax, then volumes will shrink, and we are looking at 2030 to 2035 as a more likely end date.”
The system is owned and operated by British multinational conglomerate Ineos, one of the largest chemical companies in the world, and transports around 30% of the UK's oil per day to shore from 80 offshore gas and oil fields.
However, recent months have seen the daily hydrocarbon flows fall from one million barrels a day to just 200,000.
A new UK windfall tax on oil and gas companies will increase tax by 3% on 1 November. The increase will lead to the headline tax rate for oil and gas operations reaching 78% – one of the highest in the world.
During its election campaign, Labour claimed Britain has “tremendous untapped advantages: our long coastline, high winds, shallow waters, universities, and skilled offshore workforce combined with our extensive technological and engineering capabilities”.
At the heart of Labour’s thinking is the so-called Green Prosperity Plan, which will, in partnership with business through the National Wealth Fund, invest in the industries of the future, with the party planning to create “650,000 jobs across the country by 2030”.
The Forties conventional oilfield has produced 98.99% of its total recoverable reserves, with peak production in 1980, according to research from GlobalData, Offshore Technology’s parent company.
Based on economic assumptions, production will continue until the field reaches its economic limit in 2030. The field currently accounts for approximately 1% of the country’s daily output.
A spokesman for Radcliffe, as per a UK media outlet, said this weekend that over “the last few decades the UK has invested billions in North Sea infrastructure, which continues to serve the UK economy, society and the Exchequer extremely well”.
They added that it is “unfathomable that Labour’s policies will burn these in a flash. It is throwing away valuable technology along with the skilled workers necessary to meet today’s energy needs and to transition towards a low carbon future.”
