Britain has proposed relaxing rules governing tax relief on the cost of decommissioning oil fields, to remove a time limit that encourages companies to decommission early and leave oil in the ground.
In a paper released on Thursday, the UK Treasury proposed an extension of the so-called three-year loss carry-back rules for North Sea firms.
Currently, companies can only claim decommissioning costs against profits made in the final three years before decommissioning.
As profitability declines at the end of a field's life, the last three years' profits may not be enough to absorb the costs, whereas early decommissioning would allow offset against a healthier profit stream.
"As a consequence, this is likely to lead in a number of cases to premature decommissioning," the Treasury added, saying the conclusions followed consultation with industry.
North Sea oil and gas production is currently in decline, encouraging the big oil companies such as Royal Dutch Shell Plc and BP Plc, which developed the province, to shift their focus to more promising areas in Africa and elsewhere.
Via: Reuters
In a paper released on Thursday, the UK Treasury proposed an extension of the so-called three-year loss carry-back rules for North Sea firms.
Currently, companies can only claim decommissioning costs against profits made in the final three years before decommissioning.
As profitability declines at the end of a field's life, the last three years' profits may not be enough to absorb the costs, whereas early decommissioning would allow offset against a healthier profit stream.
"As a consequence, this is likely to lead in a number of cases to premature decommissioning," the Treasury added, saying the conclusions followed consultation with industry.
North Sea oil and gas production is currently in decline, encouraging the big oil companies such as Royal Dutch Shell Plc and BP Plc, which developed the province, to shift their focus to more promising areas in Africa and elsewhere.
Via: Reuters
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