UK Tax Policy in the Oil and Gas Sector: An Empirical Examination of Recent Changes

The UK oil and gas industry is past maturity, with an ageing infrastructure. The UK North Sea Transition Authority (NSTA, formerly, the Oil and Gas Authority (OGA)) has set Maximising Economic Recovery as a key objective for operators. This aims to preclude the decommissioning of mature fields by transferring ownership of late-life oil/gas assets to independent, smaller firms capable of operating them at reduced costs, thus extending the lives of these assets. Such transfers are complicated by policies concerning the tax capacity of the buyer; the transferability of tax history between operators; the issue of a "no clean break" between operators and government; the functioning of decommissioning tax relief; the risk that smaller operators' ultimate failure to decommission may result in costs falling upon the UK Government, hence on taxpayers; and recent commitments to "net zero" carbon emissions. This article examines the effect of the decommissioning tax relief and transferability of tax history policy mechanisms on decommissioning late-life oil/gas assets on the UK Continental Shelf (UKCS) or extending their lives by way of the transfer of ownership. Utilising semi-structured interviews to obtain empirical data, the authors conclude that transferring ownership between operators Maximises Economic Recovery, contributes to revenue and does not expose taxpayers to potential decommissioning costs. However, the fairness of the UK petroleum fiscal regime, and in particular the administration of decommissioning tax relief, appears questionable