Taxpayers face £24bn bill for oil and gas decommissioning, NAO warns

Cost of tax reliefs for oil and gas companies will come out of the public purse

The National Audit Office (NAO) has warned that the cost of decommissioning the UK’s offshore oil and gas infrastructure could be much higher than the £24bn estimated by the government.

HMRC has forecast the total bill for taxpayers, but the NAO said this is “subject to significant uncertainty”.

The Oil and Gas Authority (OGA) estimates that the decommissioning process will cost operators between £45bn and £77bn – with the associated tax reliefs being paid from the public purse.

The government’s prediction is based on the central estimate from the OGA’s range of forecast costs to operators, which in 2018 was £58.3bn.

However, the NAO said, the actual cost will depend not just on the cost to operators, but also on outside factors such as the oil price and exchange rates.

UK oil and gas operators have increasingly been decommissioning their infrastructure in recent years, as reserves run out and tax revenues decline, spending more than £1bn each year to take oil and gas production facilities offline.

In 2018, the Intergenerational Foundation said its research pointed to a much higher cost for decommissioning, with younger generations facing a bill of more than £80bn.

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