OT27014 - Abandonment and Decommissioning

Ring Fence trades: Abandonment Programme

In CAA 90\s62A (CAA01\s163) "abandonment programme" has the same meaning as in Part IV of the Petroleum Act 1988. "Abandonment programme is defined in Section 29 of that Act essentially as a programme required by the Secretary of State setting out the measures proposed to be taken in connection with the abandonment of an offshore installation or submarine pipeline. The Secretary of State may reject a programme or approve it with or without modification or conditions.

It is important to note that an abandonment programme may be required in circumstances other than the closing down of the whole or part of an oil field, e.g. to remove an installation in mid field life, so the ‘closing down’ condition for the special allowance needs to be considered separately.

The decommissioning costs have to be incurred ‘wholly or substantially’ to comply with an abandonment programme. This phrase is intended to ensure that relief is not lost because of minor deviations from the programme.

Relief can be given for expenditure incurred before an abandonment programme is approved, provided that it is incurred to comply with the programme as approved or with any condition to which the approval of the programme is subject. In particular, relief can be given for expenditure incurred before 7 August 2000 (the date the new legislation takes effect) if incurred to comply with an abandonment programme approved after that date.

Expenditure on decommissioning may be incurred outside the terms of an abandonment programme. This will not qualify for the special allowance although it may attract relief under other provisions.

It will normally be desirable to see the terms of the approved abandonment programme.