Economic Report 2013

Recent Developments with Field Allowances

During 2012, there were a number of extensions to the FAs, as follows: • A new class of FA was introduced in March 2012 for deep water oil fields with a pre-tax value of £3,000 million. This enabled a consortium led by Chevron to continue with its development of the Rosebank field to the west of Shetland. • Also in March 2012, the Small Field Allowance was increased in value to £150 million pre-tax and in scope to cover fields up to 50 million boe of recoverable reserves. • In July 2012, another new FA was introduced with a £500 million pre-tax value for large, shallow water gas fields.

The most significant change occurred in September 2012, when the FA concept, which had only previously been applied to new fields, was extended to cover incremental investment projects in fields already in production. The resulting BFA was the culmination of over 12 months of work, led by Oil & Gas UK, with the government and industry. It introduced a capital cost based allowance per project, scaled with its size. As long as the capital costs exceed £60 per tonne of recoverable oil (approximately $12/bbl), the allowance is available for each tonne that the project is expected to recover. The BFA is calculated on estimated capital expenditure and estimated reserves to be recovered at the time the project is granted development consent.

Figure 33: The Brownfield Allowance

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ECONOMIC REPORT 2013