Relief confirmed for UK offshore decommissioning

Offshore staff

LONDON – Oil & Gas UK has welcomed the UK Treasury’s publication of details of the Decommissioning Relief Deed.

This is a contract between the government and UK sector oil and gas licensees, designed to provide assurance of the continued availability of tax relief on decommissioning costs.

Mike Tholen, Oil & Gas UK’s economics and commercial director, said: “The measure…will enable investors to secure a level of certainty on decommissioning tax relief that can be reliably factored into investment decisions and commercial decommissioning security arrangements.

“Certainty on decommissioning tax relief was first proposed in Budget 2011 and industry has worked closely with government to resolve what has until recently been seen to be an intractable problem. These measures will have a profound positive impact on industry activity and there are signs they are already encouraging new commercial activity across the UK continental shelf.

“Long-term certainty on decommissioning relief will, at no cost to government, facilitate the sale of assets to companies most suited to invest in them, provide renewed confidence for late-life investment by current and new owners, and liberate new funds for use in extending the productive lives of many mature fields.”

This, along with the brownfield allowance announced in September, Tholen added should encourage near-term investment in many mature UK offshore facilities. In the longer term, he said, it should postpone decommissioning by five to seven years on average, allowing a further 1.7 Bboe of oil and gas to be developed.

Oil & Gas UK has projected that decommissioning existing UKCS facilities will cost £28.7 billion ($46.3 billion) by 2040, and new investment could add £4.3 billion ($6.9 billion) to this total.

12/17/2012

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