Oil and Gas Decommissioning Relief Deeds

Gareth Davies Excerpts

Thursday 21st March 2024 Written Statements

[The Exchequer Secretary to the Treasury (Gareth Davies)]

At Budget 2013, the Government announced that they would begin signing decommissioning relief deeds.

Since October 2013, the Government have entered into 108 decommissioning relief deeds. Offshore Energies UK estimates that these deeds have so far unlocked approximately £11.8 billion of capital, which can now be invested elsewhere.

The Government committed to reporting to Parliament annually on progress with the decommissioning relief deeds. The report for the financial year 2022-23 is provided below.

Number of decommissioning relief agreements entered into: the Government entered into four decommissioning relief agreements in 2022-23.

Total number of decommissioning relief agreements in force at the end of that year: 105 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: three payments were made under a decommissioning relief agreement in 2022-23, for £16.2 million in total. These were made in relation to the provisions recognised by HM Treasury from 2015 onwards as a result of companies 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: 16 payments have been made under any decommissioning relief agreement as at the end of the 2022-23 financial year, totalling around £260 million.

Estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. HM Treasury’s 2023-24 accounts will recognise a provision currently estimated to be £254 million in respect of decommissioning expenditure incurred as a result of companies defaulting on their decommissioning obligations¹. The majority of this is currently expected to be realised over the next several years.

¹ This figure, which is an estimate at the last interim reporting period, is unaudited and takes into account payments made subsequent to the financial year covered by this written ministerial statement. The estimate is under review ahead of the year end reporting period and may be updated to reflect newer information.

[HCWS365]