Monday, 10 April 2017
Decommissioning UK North Sea platforms comes at a huge price - tax payer likely to foot the bill
The costs are considerable. While estimates vary wildly, most settle on 70-110 billion euros that have to be spent on decommissioning installations in the UK part of the North Sea in the next 40 years. The crucial question is who is going to pay for it. Research group Wood Mackenzie warned taxpayers are facing a 24 billion euro bill for decommissioning oil and gas fields, 50 per cent higher than the official Treasury estimate of around 16 billion http://www.telegraph.co.uk/news/2017/01/09/cost-decommissioning-north-sea-wipe-future-tax-revenues/
The industry argues that the latest nose-dive of oil prices and declining production rates make tax-reliefs inevitable. The arguments seem to resonate with the regulator. According to a new study by the GMB union, the taxpayer might be liable for up to £75bn, as the UK government pledged in 76 different agreements to provide government aid for decomissioning http://www.bbc.com/news/uk-scotland-scotland-business-38048562.
This is not in line with legal obligations. According to the overarching `polluter pays principle,` the industry is responsible for tackling challenges that are brought about by ageing infrastructure. However, this is not likely to be implemented stringently in practice, as the UK industry failed to build up substantial financial reserves throughout the last decades to pay for decommissioning, according to the report.