Will the decommissioning relief deed benefit North Sea operators?
DECOM NORTH SEA
The deed was also welcomed by Decom North Sea, a forum with more than 200 members including operators and contractors.
Decom North Sea said on the matter, “The chancellor’s confirmation of tax relief through Decommissioning Relief Deeds will help ease one of the greatest concerns facing the North Sea industry and lead to investment and ultimately more jobs.”
“Once assets have been recognised as nearing the end of their economic lives, we believe the Budget will lead to operators being able to move forward with their decommissioning plans,” – a move that will surely help to reassure the supply chain and encourage new investment in innovation.
An alternative view from consultancy firm EY, Ernst & Young, said the move by the government would “act as a gateway to greater investment”.
Speaking on the subject, Derek Leith, Head of Oil and Gas Taxation at the company based in Aberdeen continued,
“Cementing the promise of contracts that guarantee tax relief on costs associated with deactivating and dismantling oilfields during the lifetime of this, and future parliaments removes another layer of fiscal uncertainty from the UK Continental Shelf and should facilitate the transfer of assets.”
Mr Leith also pointed towards the smaller companies who previously were priced out of the market, who now find themselves in a position to recover reserves from existing infrastructures.
This knock-on effect will free up capital of the larger firms to fund new exploration projects.
A POSITIVE FUTURE
The relief deed has not only caught the imagination of the oil and gas industry but will definitely help to secure a longer future in the maturing UKCS basin.
It is safe to say that the industry has welcomed the tax relief as a route toward instilling new confidence in the UK’s oil and gas sector – and benefits will eventually be seen by the operators and its supply chain following successful campaigns.
Despite issues surrounding the powers of the new Oil and Gas Authority (OGA), who will eventually be fully-funded by the industry, the relief deed looks to have come at the right time for the North Sea to boost the ailing economy and increase the options open to operators looking at large decommissioning liabilities.
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