EDINBURGH, UK – Analysts Wood Mackenzie have given the thumbs-up to the field allowance and decommissioning measures announced last week by the UK government.
In the 2012 Budget, the chancellor committed to creating contractual certainty on tax relief available for field abandonment. This, the analysts say, will mean companies can provide financial security for abandonment on a post-tax basis.
Over recent years, some mature asset deals have stalled or failed due to would-be buyers’ difficulties in providing the pre-tax financial security required for decommissioning liabilities. Wood Mackenzie believes certainty on abandonment relief will improve conditions in the mature asset market.
Transactions on these assets are positive for the UK continental shelf as a whole, they add, ensuring that important infrastructure is kept operational for longer, maximizing future tie-back opportunities.
Greater certainty on tax relief should also help companies plan for abandonment expenditure, which Wood Mackenzie estimates at £28 billion ($44 billion) in 2012 terms.
The doubling of the small fields value allowance means that nine further probable developments, with recoverable reserves of 318 MMboe, now qualify for the allowance.
Finally, the west of Shetland £3-billion ($4.7-billion) value allowance increases the value of Chevron’s Rosebank project in this region, and may help it progress toward development sanction. No other commercial fields qualify, although there is exploration under way west of Shetland.