Jim Ratcliffe has become an expert at a certain type of corporate theater that occurs when a billionaire wishes to communicate with a government. This month, the founder of Ineos declared that his business had acquired a 21% share in a portfolio of Shell’s oil and gas assets in the Gulf of Mexico. Instead of letting the transaction speak for itself, he took the opportunity to criticize European and British energy policy in almost gleeful terms. “Europe is all over the place,” he remarked. “From an investment point of view, you always go to the stable rather than the unstable.” It has to do with oil. Britain was the subject of the news release. It was never really possible to separate the two.
On paper, the investment itself is fairly simple. Ineos Energy and Shell will collaborate on a group of properties located approximately 80 miles off the coast of Louisiana. The Trump administration is now adamant on renaming this body of water the Gulf of America, a change that various media sites covering the deal noticed with differing degrees of dryness. Shell’s Fort Sumter discovery, which is thought to contain more than 125 million barrels of oil equivalent, is the focal point. In addition, there is the Sisco exploratory well and a pledge to find at least one further well before the end of 2030. Ineos’s total committed US investment now exceeds $3 billion, marking the latest step in what the firm publicly refers to as a purposeful shift across the Atlantic. The financial terms were not disclosed.
The aspect that should unnerve British policymakers is the economic reasoning that lies beneath the rhetoric, which is very difficult to refute. After Chancellor Rachel Reeves increased the levy in her October budget, upstream oil and gas profits in the UK now face an effective tax rate of about 78%. The comparable US rate, which is comparable to regular company tax, is roughly 21%. No amount of patriotism can keep the capital at home when the same barrel of oil is taxed almost four times more highly on one side of the Atlantic than the other. In a Telegraph opinion piece, former BP executive and Ineos chairman Brian Gilvary stated unequivocally that none of these agreements would have been profitable in the UK given its existing tax system and “negative political attitude towards oil and gas.”
However, there is a paradox that the outrage tends to mask, and it’s worth considering. The last ethylene plant in Britain, Ineos’s Grangemouth facility, received a £105 million investment from the UK government in December after Ratcliffe threatened to shut it down without government assistance. Hundreds of jobs were spared by the bailout, which Ratcliffe hailed at the time as an indication of the government’s “commitment to British manufacturing.” Thus, by spring, the same individual who had embezzled British taxpayer funds throughout the winter was openly criticizing Britain. Both positions—appreciation for one rescue, dissatisfaction with the larger policy environment—can be held logically, but the optics are unpleasant, and the quickness of the change indicates how transactional these relationships have become.
Ratcliffe’s position as the self-assured capital allocator is complicated by the condition of his personal balance sheet. Ineos had net debt of more than $18 billion at the end of the previous year, which is a truly concerning multiple of about 13.5 times its yearly earnings. Since September, Moody’s has downgraded the group’s debt twice, citing “continued and greater than expected deterioration” in operating performance. Ratcliffe is apparently close to selling the Ligue 1 football team Nice as part of a disposal campaign to bolster his finances, while his co-founder Andy Currie has listed his 271-foot yacht for €85 million. This is not an example of a business making investments from a position of overwhelming power. Under severe financial strain, the corporation is carefully deciding how to allocate its remaining funds.
The Gulf of Mexico agreement is presented in a more intriguing perspective in light of this setting. According to Ineos Energy CEO David Bucknall, it’s a systematic approach to capital allocation that focuses on “areas close to existing infrastructure where we can move quickly, control costs and unlock new production.” By collaborating with Shell, the expense and risk are distributed. Compared to wildcat exploration, building on an existing find like Fort Sumter carries less risk. That kind of measured, shared-risk expansion makes sense for a corporation that is heavily indebted. If you read this with more skepticism, you’ll see that it’s a business that needs every penny to work harder in order to escape a high-tax jurisdiction in favor of a low-tax one, all the while disguising financial necessity as a commitment to energy policy.
For a few years now, European industrial leaders have been narrating this story in different ways. The United States, where the Inflation Reduction Act’s incentives and the Trump administration’s enthusiasm for fossil fuels have created a far friendlier environment, is attracting chemical and energy investment due to high energy costs, strict regulations, and what they perceive to be political animosity toward heavy industry. Simply put, Ratcliffe is remarkably direct about it. According to him, “competitive energy prices are highly correlated with economic growth, and it’s a huge issue for national security.” You cannot operate your hospitals, businesses, or homes without energy.” When the messenger’s self-interest is taken out of the picture, there is a legitimate point that European governments have been reluctant to address.
