UK Decommissioning Tax Relief Estimate in Question

Friday, January 25, 2019

Britain's public spending watchdog on Friday questioned a government estimate of 24 billion pounds ($31 billion) as the cost of tax relief to decommission oil and gas infrastructure.

As one of the oldest and most mature oil basins, Britain's North Sea represents the world's biggest decommissioning project, with the Oil and Gas Authority estimating operators will need to spend around 60 billion pounds.

The government has given oil and gas operators different kinds of tax relief designed to revive investment in the British North Sea, where oil production has plummeted from 2.6 million barrels per day in 1999 to around 1 million.

Tax relief for decommissioning is designed to lower the threshold for potential buyers of oil fields who might otherwise balk at the option of investing in limited future production and eventually be saddled with a huge decommissioning bill.

"The government estimates that decommissioning the UK’s offshore oil and gas infrastructure will cost taxpayers 24 billion pounds, although the actual cost is highly uncertain," the National Audit Office said, referring the years until 2063.

The final cost depends on factors such as the oil price, foreign exchange rates and technological progress.

"The NAO found that there are gaps in the government’s understanding of the costs and benefits of changes to the tax regime. HM Revenue and Customs has not historically calculated the total combined cost of decommissioning tax reliefs it has already given to operators," the NAO added.

The watchdog, which can give recommendations to government to change its spending, did not do so in this case and when asked whether the statement was meant as a call to change the rules, an NAO spokesman said it was not.

The government said in an emailed statement in response to the NAO's report that it was working with the oil industry to minimize decommissioning costs.

"By providing tax relief on decommissioning we are attracting continued investment into our reserves - supporting jobs, boosting the economy and protecting our energy supply," a government spokesman said.


($1 = 0.7666 pounds)

(Reporting by Shadia Nasralla Editing by Alexander Smith)

Categories: Legal Finance Offshore Energy Europe Decommissioning Government Regulations

Related Stories

Japanese Oil and Gas Firm Enters Two Blocks off Malaysia

BP Expands Oil and Gas Scope in Azerbaijan with New Projects and Exploration Rights

Azeri SOCAR Plans New Agreements with Oil and Gas Majors

TPAO, SOCAR and BP to Ink Caspian Sea Oil and Gas Production Deal

Fugro Lands Deepwater Gas Field Job in Southeast Asia

Shell-Reliance-ONGC JV Complete India’s First Offshore Decom Project

India Stretches Bids Deadline for 13 Offshore Deep-Sea Mineral Blocks

Borr Drilling Bags Three New Assignments for its Jack-Up Drilling Rigs

Op-Ed: Kazakhstan’s National O&G Firm Positioning Itself as Global Energy Player

Woodside to Shed Some Trinidad and Tobago Assets for $206M

Current News

Petronas Expands Suriname Portfolio with Deepwater Block Acquisition

Japanese Oil and Gas Firm Enters Two Blocks off Malaysia

Yinson Production, “K” LINE Target Europe's CCS with FSIU and LCO2 Solutions

Woodside Agrees Long-Term LNG Supply with Petronas Unit

MODEC and Terra Drone Renew FPSO Drone Inspection Partnership

Yinson Production Closes $1B Investment to Drive Further Growth

Petronas-Eni Upstream Joint Venture to Take Up to Two Years to Set Up

Wood JV Gets EPC Job for Shell off Brunei

Chuditch Gas Field Drilling Ops Get Delayed to Next Year

French Oil Major Acquires Interests in Multiple Blocks in Southeast Asia

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com