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Oil and Gas Decommissioning Relief Deeds

Treasury written statement – made on 25th March 2020.

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Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

At Budget 2013, the government announced it would begin signing decommissioning relief deeds. These deeds represented a new contractual approach to provide oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs.

Since October 2013, the government has entered into 96 decommissioning relief deeds.

Oil & Gas UK estimates that these deeds have so far unlocked approximately £8.1bn of capital, which can now be invested elsewhere.

The government committed to report to Parliament every year on progress with the decommissioning relief deeds. The report for financial year 2018-19 is provided below.

  1. Number of decommissioning relief agreements entered into: the government entered into 5 decommissioning relief agreements in 2018-19.
  2. Total number of decommissioning relief agreements in force at the end of that year: 92 decommissioning relief agreements were in force at the end of the year.
  3. Number of payments made under any decommissioning relief agreements during that year, and the amount of each payment: one payment was made under a decommissioning relief agreement in 2018-19, for £43.2m[1]. This was made in relation to the provision recognised by HM Treasury in 2015, as a result of a company defaulting on its decommissioning obligations.
  4. Total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments: four payments have been made under any decommissioning relief agreement as at the end of the 2018-19 financial year, totalling £94.0m.
  5. Estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the government has not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. HM Treasury’s 2019-20 accounts will recognise a provision of £285.9m in respect of decommissioning expenditure incurred as a result of a company defaulting on their decommissioning obligations[2]. The majority of this is expected to be realised over the next four years.

[1] This figure takes into account a revision made to a claim in 2017-18 that was reported in a previous Written Ministerial Statement (HCWS1435).

[2] This figure takes into account payments made subsequent to the financial year covered by this Written Ministerial Statement.

This statement has also been made in the House of Lords: HLWS184