ECONOMIC REPORT 2013
46
Oil & Gas UK believes that the BFA is essential
in enabling maximum recovery of the UKCS’
resources and ensuring that projects are
competitive in attracting international capital
investment. Since the BFA was introduced,
more than £3 billion of capital expenditure has
been allocated to some of the oldest and most
mature fields on the UKCS, unlocking around
300 million boe of reserves.
However, as mentioned above in Section 4, it
is clear that the taxation of the UKCS will have
to be refined further in the years to come to
ensure that the overall objective, shared by
government and the industry, of recovering
as much oil and gas as is economically possible
is achieved.
A table explaining the various field allowances
can be found in the Appendix of this report.
Decommissioning Tax Relief
Operators are under an obligation to
decommission their wells, platforms,
pipelines and other facilities once
production from a field has ceased (there
are strict regulatory requirements in place).
Clearly, this is an expensive process which
is currently forecast to cost the order of
£35-40 billion for the whole UKCS (in 2012
money). As with the original investment, it
is a cost which is allowable for tax purposes.
However, profits have been taxed year by
year without any provisions being allowed
for future decommissioning expenditure
and, furthermore, there has never been any
certainty that tax relief on decommissioning
costs will be available as and when the
expenditure is incurred.
