Decommissioning Insight 2019

3.1 2019 — A Busy Year for decommissioning 2019 has been a notable year from a regulatory and policy perspective in the UK’s decommissioning industry. Whilst the industry has been building capability and expertise at a practical level, there also continues to be a high degree of dialogue with government and regulators alike, which will shape the outlook for the industry at home and abroad. The pace of consultations and industry engagement clearly demonstrates that policymakers are determined to do things diligently and with an appropriate evidence-based approach. National Audit Office Report 1 — At the turn of the year, the National Audit Office (NAO) issued a report on the state of the UK’s decommissioning industry after a period of evidence gathering in 2018. This report affirmed the role of the oil and gas industry as a positive contributor to the UK economy. It highlighted that this value generation is a combined commitment between government, regulators and industry and showed cost reductions benefit all parties, reducing the financial exposure to both government and industry alike. The NAO report highlighted that the total costs of decommissioning on the UKCS could range from £45 billion to £77 billion, with government cost exposure of £24 billion through tax relief, based on a central decommissioning cost estimate of £58 billion. In contrast, it highlighted that the oil and gas industry has contributed £334 billion in direct production tax payments since the early 1970s, a multiplier of at least 14 to 1. The report noted that tax relief is provided on a proportionate basis, based on decommissioning expenditure, and the total exposure to government will diminish as the industry continues to make inroads into efficiency improvement and cost reduction. The report also examined the current system of securitisation and financial oversight and observed that it provided considerable protection of the state’s liabilities. Decommissioning Call for Evidence — The Department for Business, Energy and Industrial Strategy (BEIS) launched a ‘call for evidence’ to understand how the UK could strengthen the domestic offshore oil and gas decommissioning industry, supported by HM Treasury. 2 1. How the UK decommissioning industry could further improve its ability to serve the UK market, support MER UK and reduce the overall costs of decommissioning 2. What could be done to encourage the domestic industry to export its decommissioning expertise abroad and position Scotland, together with the rest of the UK, as a world-leading hub for decommissioning OGUK responded to this consultation on behalf of the industry, which has helped to provide a fresh perspective of the wider contribution to the UK economy. Details of the response are discussed in Section 4. This consultation had two central themes:

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1 www.nao.org.uk/wp-content/uploads/2019/01/Oil-and-gas-in-the-UK-offshore-decommissioning.pdf 2 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/ 785544/strengthening-uk-offshore-oil-gas-decommissioning-industry-cfe.pdf

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