Tuesday 11 December 2012
Certainty on Decommissioning Tax Relief to have Profound Effect on UK Oil and Gas Production, says Oil & Gas UK
Oil & Gas UK today (11 December) welcomes the Treasury’s publication of details of the Decommissioning Relief Deed, a contract between the Government and oil and gas licensees aimed at providing certainty on the continued availability of tax relief on decommissioning costs and hence boosting investment and extending the productive life of the UK’s oil and gas.
Mike Tholen, Oil & Gas UK’s economics and commercial director, said: “The measure announced today 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. Together with the brown-field allowance announced in September, it will promote near-term investment in many mature assets and in the longer-term postpone decommissioning by five to seven years on average and unlock a further 1.7 billion barrels of oil and gas over time.
“In this move, the Government has brought down what was a major barrier to investment in the UK’s oil and gas which should allow the industry to make a much fuller contribution to economic growth which is great news for British jobs and tax revenues.”
Notes to Editors
- Oil & Gas UK is the leading representative organisation for the UK offshore oil and gas industry. Its growing membership, which now numbers over 310, comprises approximately 50 operator and 260 contractor companies ranging from major global companies to SMEs.
- Oil & Gas UK has projected that decommissioning existing UKCS facilities will cost £28.7 billion by 2040 and new investment could add £4.3 billion to this total.
- For more information on total decommissioning costs, click here. Oil & Gas UK’s 2012 Decommissioning Insight carries details of forecast expenditure from 2012 to 2017 here.
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