OT27012 - Abandonment and Decommissioning

Ring Fence trades: Offshore installations and Submarine Pipelines

In CAA90\s62A (CAA01\s163) offshore "installation" and "submarine pipeline have the same meaning as in Part IV of the Petroleum Act 1988.

"Offshore installation" as defined in Section 44 Petroleum Act 1998 broadly covers oil or gas installations used for exploration, exploitation, storage, conveyance or accommodation in the UK territorial sea or a designated area of the UK continental shelf.

"Submarine pipeline" as defined in Section 45 Petroleum Act 1998 broadly covers pipelines in, under or over the UK territorial sea or a designated area of the UK continental shelf.

The "territorial sea" is defined in Territorial Water Orders in Council 1964 and 1979 and is the area of sea extending to 12 miles from the low water mark around the coast, subject to certain exceptions, mostly off the west coast of Scotland, where parts of the sea between the coast and the territorial sea baseline are technically part of the UK itself.

A "designated area" is an area designated by Order in Council under Section 1(7) of the Continental Shelf Act 1964 (see ICTA 88\s830(2)(c)). This covers broadly the area from the boundary of the territorial sea to the edge of the UK continental shelf.

These definitions necessarily exclude all onshore pipelines and installations, even where they might be regarded as incidental to offshore assets. It is not however intended to deny relief for decommissioning costs incurred onshore in respect of qualifying assets situated offshore before decommissioning.

An installation may be an “offshore installation” even if it is situated outside a designated area of the UKCS. This may occur if the installation lies within the boundaries of a transmedian field and is used to exploit UK oil or gas resources. Section 44 Petroleum Act does not place a physical limitation on where the installation has to be situated. The special decommissioning allowance will only be available if the other conditions are satisfied. Subject to the precise facts, the allowance can be given if the decommissioning of the installation is carried out to comply with an abandonment programme for the decommissioning of the non-UK side installations provided in support of the decommissioning programme for the UK side installations.