Decommissioning in the UK
Brent is just one of around 470 installations that will be decommissioned in the UK sector over the next 30 to 40 years. In the wider North Sea, industry experts expect to see around 600 installations decommissioned.
So far, around 10% of the North Sea has entered the decommissioning phase. Some 40 decommissioning programmes have been submitted to the government’s Department for Business, Energy and Industrial Strategy (BEIS) – the government body that regulates the decommissioning of offshore oil and gas installations and pipelines in the UK. The BEIS website provides a comprehensive overview of decommissioning programmes which can be accessed here:
This presents the UK with the opportunity to become a global leader in decommissioning – with skills and experience that can later be deployed around the world.
There are around 1000 people currently working on the Brent Project, both offshore and onshore, and the majority are employed by UK companies. The Brent Project is contributing to the positive impact on the supply chain, and local companies.
In terms of overall Brent Decommissioning project spend to 2025, we expect greater than 85% UK content. The final number will likely be higher as some contracts have still to be awarded.
Tax and Decommissioning Relief Deeds (DRDs)
Decommissioning is a cost incurred as part of the lifecycle of the field, and is therefore tax deductible. This is not unusual – corporate tax is paid on profits, which for an oil field is calculated as the sum of the income generated by the facility, minus the costs of setting it up, operating it and decommissioning the field at the end of its life. Like other investments in infrastructure, decommissioning costs are subject to tax relief.
The government has agreed a legally binding framework with the oil and gas industry to ensure long term certainty on the tax relief regime for decommissioning costs, which helps to safeguard continuous investment in the North Sea. The agreement, known as Decommissioning Relief Deeds (DRDs), ensures operators can plan for and quantify the future decommissioning costs.
Shell and Esso will be paying the decommissioning costs for the Brent Field. The tax relief we will get back is not a subsidy or a new cost to the taxpayer – it’s a refund – i.e. the tax has already been paid by Shell and Esso in previous years.
Given that the government has received more than £20 billion (in today’s money) as tax from the Brent field, the tax relief Shell and Esso will receive once decommissioning is complete, will have been paid for many times over already.