Satellite Field Developments

Abstract

In the UK offshore area a significant petroleum resource occurs in relatively small accumulations close to existing platforms. Many of these discoveries remain undeveloped for a variety of technical and/or economic reasons. Exploitation of these reserves may be achieved by means of established production technology, such as small fixed platforms, floating systems or subsea installations, or may require novel, low cost solutions. In any case, proximity to existing fields will provide an opportunity for shared facilites such as transportation, gas separation, power generation or manpower accommodation.

A number of fiscal disincentives to development currently exist within the UK tax regime, principally the loss of Petroleum Revenue Tax PRT allowances which would occur if the satellite were deemed part of an existing field rather than a separate entity with its own ‘ring fence’. Possible approaches to overcoming this problem include a relaxation of restrictions on capital uplift, safeguard and oil allowances for PRT, and a move to ‘project’ definition rather than ‘field’ definition wherever possible. These approaches are examined for several examples and the effects on cash flows demonstrated. Difficulties which may occur in reaching asset-sharing agreements between licencees in different fields are also highlighted, and a more active role for government in encouraging such agreements is suggested.