UK continental shelf upstream oil and gas taxation

The North Sea fiscal regime is one of the main mechanisms for capturing for the nation the economic benefit from the UK's oil and gas resources. The special UKCS tax regime is designed to secure an appropriate share of profits for the nation while offering stable, attractive and economically sound investment conditions to the oil industry. Like the licensing system, the tax system has developed over time. It is kept under continuous review and many adjustments have been made to it to reflect changes taking place in the UKCS.

The main features of the current regime are:

The tax regime which applies to any particular oil field therefore depends on the date on which it received development consent. Current marginal rates of tax vary between 69.4 per cent and 30 per cent depending on the age of the field in question and its taxable position (though it should be noted that many smaller, less profitable fields pay no PRT, even though they are in principle within the PRT net):

69.4% if liable to Royalty, PRT and CT (approved before 1 April 1982 and in a PRT-paying position)

38.8% if liable to Royalty and CT  (approved before 1 April 1982 and shielded from paying PRT by allowances or other reliefs)

65.0% if liable to PRT and CT (approved between 1 April 1982 and 15 March 1993 and in a PRT-paying position)

30.0% if liable only to CT (approved between 1 April 1982 and 15 March 1993 and shielded from paying PRT by allowances or other reliefs or approved after 15 March 1993)

Well consents

Data requirements

The collection of data starts once the well has been spudded and the Operator sends in a "spud" fax. The DTI issues the official well number ( PON 12 ) to be used for all data and records resulting from its drilling. All well data, including core and cuttings material, are sent to the Directorate at various locations, as set out in the PON 9, within six months of the well operations finishing. They are then held confidentially for a period of five years.

Onshore operators have a statutory obligation to also supply well data to the British Geological Survey (BGS). More information is available on the BGS web site at

Field development

This links to Section 2.1 Key Objectives of Field Development Guidelines

This links to Section 6.1 of Field Development Guidelines

UK Government 2002 Reserves Survey

This survey will be conducted between 7th January 2002 and early February 2002. Operating companies have been contacted by letter.

The following information is available:-

Please note that two versions of the form are available depending on if you wish to report in metric units or field units.

Results of the Survey are due to be posted onto this website in April.

Field development programme process

The powers of the Secretary of State in relation to development and production consents are set out in the Model Clauses incorporated into individual licences.

The documentation required for new oil and gas field authorisations is the Field Development Programme (FDP). The discussion leading to the submission of the FDP is the process by which the Oil and Gas Directorate secures the Department's policy objectives. The aim of the process is to identify aspects of the Development Plan which relate to the Department's objectives and on which the views of the Department and Licensees may diverge. These aspects will be examined more thoroughly with Licensees, with the aim of reaching mutually satisfactory conclusions. The resulting FDP should provide a summary description of the actual development and the principles and objectives which will govern its management.

Operators considering a development are advised to contact the Department early in the appraisal stage of a field. A multi -disciplinary team from the Oil and Gas Directorate will be assigned to carry forward the technical discussion on the field, headed by a manager authorised to take technical decisions on behalf of the Department and to co-ordinate, where necessary, the Department's response on policy issues.

Licensees should provide the Department with sufficient opportunity and information to gain an understanding of the field and its conceptual development. The Department's team manager will provide notification of any aspects of the development where a conflict of interest is seen to exist and which may prevent the authorisation of the programme. The Department will then seek to agree a programme of work leading to their resolution and a timetable for its completion.

The Offshore Petroleum Production and Pipe - lines (Assessment of Environmental Effects) Regulations 1999 require that an Environmental Impact Assessment be completed for most new offshore oil and gas developments. Guidance notes are available here.

Guidance notes on procedures for regulating oil and gas field developments are available here.

The economics of field and incremental developments are considered by DTI as part of the assessment of field development programmes.

A spreadsheet entitled the Common Reporting Format (CRF) is linked for operators to fill out in order to aid DTI in this process. The CRF is built exactly along the lines of the field development guidance so every piece of information will aid an efficient assessment. Operators should, upon completion, e -mail the CRF to DTI at

Safety is the responsibility of the Health and Safety Executive, a separate Government body. Safety cases are required to be submitted for all new installations. Implementation is through the Offshore Installations (Safety Case) Regulations 1992.

Determination of fields

Legislative framework

The Oil Taxation Act 1975 introduced and made provision for Petroleum Revenue Tax (PRT) to be levied on all oil and gas fields. Schedule 1 to the Act states that all fields are to be "determined" by a boundary drawn around them. Debate on the Oil Taxation Bill, made it clear that the boundary was to be drawn using geological criteria alone so that the field was defined as a single geological petroleum structure. Field boundaries may only cover an area which is part of a licensed area. Occasionally fields may have a top and a base or overlie or abut one another.

The 1993 Finance Act abolished PRT for new fields and thereby created two categories of field:

Old Fields: Those given development consent before 16 March 1993. These fields are subject to PRT.

New Fields: Whilst not subject to PRT, it was agreed that all new fields would receive determinations and re - determinations as appropriate in order that all fields were defined in the same way. Determinations are still needed for Corporation Tax purposes.

Field determination process

Before an oil field is given development consent by the Minister, a proposed determination of the field must have been made.

The process of making such a determination involves issuing a proposal (for the boundary) to all Licensees having an interest in the licence (blocks in which the field is situated), together with Licensees in the adjacent blocks, so that all parties may ensure that their interests in the oil field will be recognised. The boundary is defined offshore by parallels of Latitude and Meridians joining the co -ordinate points and onshore by Grid Lines of the UK National Grid.

Licensees have 60 days from the date on which a proposal is issued to lodge any objection to it. They are then given the opportunity to present any specific concerns in more detail. Following any relevant discussion the actual (final) determination is made. A final determination must be in place prior to first production.

Fields may be re - determined at any time at the request of any party following the acquisition of new information, either seismic or from wells, which indicates that the original determination is no longer valid. An identical procedure to that described above is followed in each case.

As all fields are determined as areas of which every part is, or is part of, an area licensed under the Petroleum Act 1998, it follows that when such a licensed area is relinquished the field must be re -determined to exclude that area.

As at 1 March 2000, 304 fields had been or were in the process of being determined.

Field consents


This links to Section 5.1 of Field Development Guidelines

Flaring and venting

This links to Section 5.1.3 of Field Development Guidelines


This document describes how the Department would handle such applications. It sets out the requirements and obligations on all parties; the approach the Department will take in handling applications; and the principles it will take into account in determining access. Published July 2002

Response to December 2001 consultation on proposed guidance. Summarizes respondents' views on the Departments proposals for detailed guidance setting out the proposed open and transparent approach and tariff setting principles; explains the Department's assessment and decisions; includes the published guidance. Published July 2002

Summary of the main provisions of the 1998 Agreement (the "Framework Agreement") between the UK and Norwegian Governments relating to the laying and operation of future inter - connecting oil and gas pipelines across the maritime boundary between the two States

This links to Section 2.3.2 of Field Development Guidelines

This links to Interim Guidelines for the Completion of Pipeline Works Authorisations

Response to February 2001 consultation on infrastructure.

Summarizes respondents’ views on the effectiveness of the Code of Practice on negotiating third party access to upstream oil and gas infrastructure and whether access to this infrastructure is a barrier to UK Continental Shelf development; explains the Department ’s assessment and decisions; proposes some changes to the Code to improve the transparency of third party access negotiations, together with technical updates to bring the Code into line with changes in legislation; includes a revised draft text of the Code and invites industry to consider and agree the proposed (or other) changes to the Code.

Oil and Gas Infrastructure: Consultation on guidance on applications for resolution of disputes over third party access (URN 01/1465)

Consultation Document Contents

Consultation on proposals for guidance to owners and prospective users of infrastructure on use of legal powers to settle disputes over third party access to infrastructure (Petroleum Act (consolidating the Petroleum and Submarine Pipe -lines Act 1975), Pipe -lines Act 1962 and Gas Act 1995).

A further consultation building on the February consultation (Oil and Gas infrastructure: Access Provisions and Voluntary Arrangements, February 2001 URN 01/540). A consulting on draft guidance on the handling of applications, including tariff-setting principles, slightly revised in the light of responses.

Consultation document issued 13 December 2001: closing date for comments 31 March 2002.

A consultation document issued in February 2001: closing date for comments 15 May 2001. Part response on publication of main commercial conditions for onshore gas processing infrastructure was published June 2001.

A summary of responses received in respect of one element of the February 2001 consultation on infrastructure. Published December 2001 as part of a further consultation on draft guidance on use of legal powers to settle disputes (URN 01/1465)

A summary of responses received in respect of one element of the consultation on infrastructure. Published June 2001

To assist owners of onshore gas processing facilities and relevant pipelines to understand the effect of the implementation of European Directive 98/30/EC and to meet their obligations to publish their main commercial conditions for access. Published June 2001

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Analysis to consultation on Guidance on Applications for Resolution of Disputes over third party Access to Oil and Gas Infrastructure

Analysis of responses to consultation (Oil and Gas infrastructure: Access Provisions and Voluntary Arrangements, February 2001URN 01/540) on review of the industry Code of Practice on Infrastructure

Consultation Document Contents


This links to Section 7.1 of Field Development Guidelines

This links to Section 7.2 of Field Development Guidelines

Field reporting

This links to Section 6.2 of Field Development Guidelines

This links to Section 6.5 of Field Development Guidelines

Back | Title | Table of Contents
Appendix 1 | Appendix 2 | Appendix 3 | Appendix 4 | Appendix 5 | Appendix 6 | Appendix 7 | Appendix 8 | Appendix 9
Appendix 10 | Appendix 11 | Appendix 12 | Appendix 13 | Appendix 14 | Appendix 15 | Appendix 16 | Appendix 17
Index Map | Plate 1 | Plate 2W | Plate 2E | Plate 3W | Plate 3E | Plate 4W | Plate 4E | Plate 5 | Plate 6
Plate 7 | Plate 8W | Plate 8E | Plate 9W | Plate 9E | Plate 10W | Plate 10E | Plate 11 | Plate 12 | Legend