North Sea decommissioning ‘could cost taxpayers £24 billion’

Decommissioning oil and gas platforms in the North Sea could end up costing UK taxpayers £24 billion, a new report has indicated.

While this total was described as being “subject to significant uncertainty”, tax breaks to help firms with the cost of this could amount to almost £13 billion.

The Government could also miss out on just over £11 billion of revenue as a result of spending on the removal of platforms and infrastructure reducing operators’ taxable profits.

With some 320 oil and gas platforms in UK waters – mainly in the North Sea – the Oil and Gas Authority has said removing these at the end of their working life could cost companies between £45 and £77 billion.

Rising levels of decommissioning have increased operators’ spending on this to more than £1 billion a year since 2014.

HM Revenue and Customs has estimated tax repayments and forgone taxes associated with decommissioning will cost the public purse £24 billion over the next 20 years.

That total is based on a central figure of £58.3 billion from the OGA estimates but the National Audit Office report states “this is subject to significant uncertainty”.

According to the report, “HMRC estimates that it will repay around £12.9 billion to operators in taxes previously collected due to decommissioning tax reliefs”.

It added it estimated “the Government will forgo a further £11.1 billion of tax income because of decommissioning expenditure reducing taxable profit”.

While the oil and gas industry has generated some £334 billion in revenues since the start of the 1970s, these have been in decline.

At its peak, revenues from the sector amounted to £30 billion in 1984-85, making up some 11% of Government receipts

The Office for Budget Responsibility expects annual receipts from oil and gas sector to increase slightly in the next few years, rising from £1.2 billion in 2017-18 to a projected £2.4 billion in 2022-23.

A Government spokesman said: “The UK’s successful oil and gas industry employs around 280,000 people, meets almost half of our energy needs and has contributed £334 billion in taxes towards our vital public services.

“By providing tax relief on decommissioning we are attracting continued investment into our reserves – supporting jobs, boosting the economy and protecting our energy supply.

“We are working with industry to increase the efficiency of decommissioning and minimise costs.”