Cluster area determinations
The OGA may propose the determination of an area as a “Cluster Area” in accordance with the Supplementary charge: cluster area allowance provisions in Finance Bill 2015.
After Royal Assent to the Finance Bill 2015, the relevant legislation will be in Chapter 9 of the Corporation Tax Act 2010. Cluster Areas are needed for capital expenditure to qualify for the Cluster Area Allowance introduced at Autumn Statement 2014.
A company or a group of companies may approach the OGA to propose that an area containing one or more high pressure/high temperature (HPHT) discoveries should be determined as a cluster area. The OGA will examine their proposal and may then arrange a discussion to review the proposed cluster area. Alternatively, after consultation with HM Treasury, the OGA may decide to approach the companies with interests in an area to propose a cluster area.
Technical meetings will then be held by the OGA with all parties with interests in the proposed cluster area. When these technical meetings are complete and the OGA and the companies have reached agreement, the companies will supply an agreed cluster area description, inventory and timed plan to the OGA.
Once the OGA has accepted these and has the agreement of HM Treasury, the OGA may then issue a proposed Cluster Area determination. Such a determination will consist of a boundary defined by parallels of latitude and meridians joining the coordinate points, and may have a top and/or base specified (for example in metres below mean sea level).
The description, inventory and timed plan for a cluster area will be subject to annual review. Progress will be monitored and necessary adjustments made after discussion between the cluster area participants and the OGA.
The process for determining a cluster area involves issuing a proposal to all licensees with an interest in the proposed cluster area and to any other licensee whose interests appear to the OGA to be affected. Details of the proposed cluster area will also be published on this page.
Companies have 30 days to make representations on it. They will have an opportunity to present any specific concerns in detail before the OGA issues the final determination of a cluster area.
For cluster areas proposed before Royal Assent to the Finance Bill 2015, capital expenditure incurred in relation to the cluster area will generate cluster area allowance from the date of publication on this website of the proposed cluster area. After Royal Assent the trigger date for capital expenditure incurred to generate the allowance will be the date of publication of the final determination.
Cluster areas may be re-determined at any time at the request of any party following the acquisition of new information – either seismic or from wells – that indicates the original determination is no longer valid. An identical procedure to that described above will be followed in each case. Since Cluster Areas can include unlicensed acreage, and in contrast to the case of oil fields all parts of which have to be in licensed acreage, there is no need for cluster areas to be redetermined when part (or all) of the area becomes unlicensed.
A cluster area is treated as not including any field (or part of a field) that received authorisation of development prior to the publication of the proposed cluster area (pre-Royal Assent to the Finance Bill 2015) or the publication of the final cluster area determination (post-Royal Assent).