Oil Industry Wants You To Foot Their Decommissioning Bill

by Alex Docherty

Oil and Gas Firms could be getting Tax breaks worth almost £13 billion – to help them with the cost of decommissioning platforms in the North Sea. 

The Government may also miss out on over £11 billion worth of revenue, because of the removal of platforms and infrastructure reducing operators’ taxable profits.

The decommissioning of oil and gas platforms in the North Sea could end up costing UK taxpayers £24 billion, a new report from the National Audit Office has indicated – this total predicted sum has been described as being “subject to significant uncertainty”.

There are 320 oil and gas platforms in UKCS, and the Oil and Gas Authority has said removing these at the end of their working life may cost companies between £45 and £77 billion.

uk-oil-exploration-territory

Increasing the amount of decommissioning has increased operators’ spending on this to over £1 billion a year.

HM Revenue and Customs has estimated that the tax repayments and forgone taxes associated with decommissioning will cost the public purse £24 billion over the course of the next 20 years.

The figures in the National Audit Office’s report are based on Estimates from the Oil Gas Authority’s Estimates.

According to the NAO report, “HMRC estimates that it will repay around £12.9 billion to operators in taxes previously collected due to decommissioning tax reliefs”.

It added it estimated “the Government will forgo a further £11.1 billion of tax income because of decommissioning expenditure reducing taxable profit”.

The oil and gas industry has generated some £334 billion in revenues since the start of the 1970s. Although these have been in decline, the Office for Budget Responsibility expects annual receipts from oil and gas sector to increase in the next few years.

A Government spokesman said: “The UK’s successful oil and gas industry employs around 280,000 people, meets almost half of our energy needs and has contributed £334 billion in taxes towards our vital public services.

“By providing tax relief on decommissioning we are attracting continued investment into our reserves – supporting jobs, boosting the economy and protecting our energy supply.

“We are working with industry to increase the efficiency of decommissioning and minimise costs.”

This report on tax breaks from the Government comes just a week before the Governments own Oil and Gas regulator is set to talk at a large Oil and Gas Industry Event.

The Oil & Gas UK Events: Exploration Conference 2019 will be taking place in London on the 31st January, For those who are not Members of the Petroleum Exploration Society of Great Britain, would have to £552 if they wished to attend the event.

However, according to Oil & Gas UK Events in 2018: “90% of delegates thought the conference delivered value for money” – as well as all “100% of delegates described the conference as excellent or good”

The 2019 conference has listed the Oil and Gas Authority (The government’s regulator) as one of the event’s keynote speakers. According to the Eventbrite page for the conference it will “be held under Chatham House rules therefore you must attend in person to hear the presentations and insights shared.” This means that the information disclosed by the Government’s own Oil and Gas Authority – will not be made available to the general public.

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