The association claims that provisions to enable transferable tax history in the Autumn Budget on Wednesday would attract new investors to theUK continental shelf, helping to unlock more deals in late-life assets.
This could prolong the life of mature fields by many years and save the Treasury on average £10 million ($13.3 million) per asset in deferred tax relief.
Currently the history of tax paid remains with the UK North Sea asset’s original owner, even if ownership of the asset changes. However, the tax paid impacts final decommissioning costs when the asset reaches the end of its productive life.
Oil & Gas UK’s analysis of 23 UK asset transfers since 2011 found that deals had on average extended field life by almost five years, while some fields had continued producing for up to an extra 14 years.
Deirdre Michie, the association’s chief executive, said: “Transferable tax history would boost the number of mature field deals we are seeing in the North Sea…
“Mature assets are attracting interest from investors who see the competitive opportunity that the UKCS continues to offer. However, the current tax position is proving to be a blocker to potential deals and that is why it is important that HMT acts to facilitate and support further deals.
“With decommissioning activity forecast on 214 fields on the UK continental shelf to 2025, there is no time to waste.”
Oil & Gas UK has stated its requests in a letter to UK Chancellor Phillip Hammond.
Michie added that the industry was already working to reduce the cost of decommissioning through new technologies, different ways of working, and sharing lessons learned from decommissioning projects under way.