(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.
- Number of decommissioning relief agreements entered into: the
government entered into 5 decommissioning relief agreements in
2018-19.
- 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.
- 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.
- 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.
- 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.
