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North Sea oil decommissioning could cost taxpayers £24bn, government estimates | Business News

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Removing defunct oil and gas rigs in the North Sea could cost UK taxpayers £24bn, according to government estimates.

Tax breaks to help firms with the bill for decommissioning could come to almost £13bn while the Treasury faces missing out on a further £11bn in tax revenue because of reduced operator profits.

With around 320 oil and gas platforms in UK waters – mainly in the North Sea – the Oil and Gas Authority (OGA) has said dismantling these at the end of their working life could cost firms between £45bn and £77bn.

HM Revenue and Customs (HMRC) has forecast decommissioning will cost the public purse some £24bn over the next 20 years.

The cost is based on a mid-range figure of £58.3bn from the OGA estimates, but the National Audit Office says “this is subject to significant uncertainty”.

A report by the public spending watchdog states: “HMRC estimates that it will repay around £12.9bn to operators in taxes previously collected due to decommissioning tax reliefs.”

It was also estimated “the government will forgo a further £11.1bn of tax income because of decommissioning expenditure reducing taxable profit”.

While the oil and gas industry has generated around £334bn in revenues since the start of the 1970s, these have been in decline.

At its peak, revenues from the sector totalled £30bn in 1984-85, making up some 11% of government receipts.

The Office for Budget Responsibility expects annual receipts from oil and gas sector to increase slightly in the next few years, rising from £1.2bn in 2017-18 to £2.4bn in 2022-23.

A government spokesman said: “The UK’s successful oil and gas industry employs around 280,000 people, meets almost half of our energy needs and has contributed £334bn in taxes towards our vital public services.

“By providing tax relief on decommissioning we are attracting continued investment into our reserves – supporting jobs, boosting the economy and protecting our energy supply.

“We are working with industry to increase the efficiency of decommissioning and minimise costs.”

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