Tuesday 21 July 2015

Oil & Gas UK Welcomes Evidence of Effectiveness of Decommissioning Relief Deeds

Oil & Gas UK is today pleased to note HM Treasury’s confirmation that the contract to give UK oil and gas investors certainty on continued availability of decommissioning tax relief via the Decommissioning Relief Deed (DRD) is proving effective.

Mike Tholen, Oil & Gas UK’s economics director, said: “Oil & Gas UK petitioned long and hard for an instrument to provide certainty on the continued availability of tax relief on decommissioning costs in order to boost investment and extend the productive life of the UK’s offshore oil and gas.

“We are therefore pleased to note the Treasury’s estimate that almost £3.5 billion that would have been locked away as security for decommissioning costs has been freed up for possible investment in further production. Given the scarcity of new investment at the moment, this is particularly welcome.

“Furthermore, locking away this money as security for decommissioning was costly with a charge of nearly £200 million a year. In the context of the current focus on improving efficiency and reducing costs to restore competitiveness, use of DRDs represents a significant cost saving.”

Ends

Note to Editors

Following work over several years to highlight how the attractiveness of the UK Continental Shelf (UKCS) as an investment proposition was being severely curtailed by uncertainty over continued access to tax relief on decommissioning costs, Oil & Gas UK welcomed the Treasury’s publication in 2012 of a contract between the Government and oil and gas licensees to resolve this. Details are available here.