Oil & Gas UK Decommissioning Security Agreement Guidance Notes (March 2009), p.10.Expert assessment As part of DSAs Oil & Gas UK`s standard DSA document, the cost estimate based on the above is an important part of an operator`s decommissioning plan and budget (the proposed plan). The DSA model or model typically contains two positions of trust. One deals with trust funds and the other deals with other decommissioning provisions, for example. B appropriations. The retention by a vendor of some or all of the decommissioning liability related to a licence interest immediately alleviates or eliminates the problem of lack of purchasing capacity so that it can reduce the tax burden on decommissioning expenses. To the extent that the seller, and not the buyer, bears the decommissioning costs, the tax reduction for these fees is a problem for the seller and not for the buyer. For both Shell and BP, it will have been essential that their transactions are structured in such a way that they can benefit from the corresponding tax breaks when they incur costs related to decommissioning expenses. From a tax point of view, the important point is that the seller pays for the closure of installations and machinery comprising an offshore installation or gas pipeline commissioned for the purpose of an exchange of circular fences and which, on the whole, carries out upstream oil and gas activities. For this reason, as well as for other simple economic reasons, closure liability is generally limited to facilities installed at the time of sale and does not extend to the closure of facilities added by the buyer after that date.
Expenses must be related to compliance with an approved demolition program or compliance with a condition imposed by the Secretary of State prior to the approval of a demolition program. In the case of Petroleum Revenue Tax (PRT) fields, the seller must retain an interest in the field licence at the time of decommissioning in order to benefit from decommissioning relief. This is not the case for non-PRT fields. There was some uncertainty as to whether a seller would be entitled to the tax relief if the buyer was primarily responsible for the decommissioning expenses and was then compensated or reimbursed by the seller. At the time of the 2016 budget, hmRC indicated that a vendor had to directly make decommissioning expenses to qualify for the landfill. Obviously, this still leaves many uncertainties and, in each given transaction structure, it may be desirable for HMRC to confirm that facilities are available. Where possible, the DSA provides for the implementation of security measures and can reduce duplication. The DSA also offers protection against defaults for all parties, including the Ministry of Energy and Climate Change (DECC). However, such an increase in M&A activity cannot mask the fact that dismantling remains one of UKCS` main problems: for operators and their partner companies; for the regulatory authority, the Oil & Gas Authority (OPC); for HMRC and for the UK taxpayer. . .