The costs of the abandonment of a field development depend on the geographical location of the structures and the number of platforms for each field, the water depth, topside weight, jacket weight, type of structure, proximity to shore, availability of equipment and the level of removal required. Thus, the overall cost of removing existing platforms is difficult to predict but is estimated to be between US$29 to US$40 billion. Both government and operator's alike have a concern that abandonment costs are so high. But how are governments addressing these cost issues?

Firstly, it must be realised that governments hands are tied in many respects with regards to decommissioning, as they are locked into complete removal of obsolete platforms (and the high costs associated with this option) in water depths less than 75 metres due to the International Maritime Organisation (IMO) guidelines, the 1958 Geneva Convention on the Continental Shelf and the 1982 U.N. Convention of the law of the sea. Platforms in deeper water do have removal options for instance, partial removal, topple in place, rigs to reefs or leave in place. Each option has advantages and disadvantages. In all cases however decommissioning will take place and the costs will be high especially in the North Sea.

Decommissioning costs do not increase oil production, in fact revenue decreases at this stage in the production life cycle. Therefore to safe guard the environment and reduce the cost burden to the operators and in Production Sharing Contract regime countries to the government themselves, governments must introduce fiscal relief regulations for abandonment costs.

Of the 135 countries with fiscal terms available for this paper, approximately 34 countries had fiscal relief clauses.

This paper will discuss the abandonment fiscal clauses and present a hypothetical model which will illustrate the best fiscal relief options for the countries which presently have no fiscal treatment of abandonment costs.

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