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Capital Allowances Act 2001

Section 167: Oil production sharing contracts

618.This section and sections 168 to 171 are based on section 64A of CAA 1990. They deal with oil production sharing contracts. In summary:

  • a production sharing contract is a contract between an oil enterprise (normally a company) and a government for production of oil to be shared between the company and the government;

  • the contractor develops the field under the contract and incurs expenditure on plant and machinery to generate the production;

  • the contract provides that the plant and machinery is transferred to the government;

  • the contract may be exclusive or there may be other companies involved (“participators”);

  • the contracts may be transferred; and

  • the ordinary plant and machinery rules do not entitle the companies concerned to allowances because they do not own the plant or machinery. Furthermore the transfer itself is a disposal event.

619.This section explains what is meant by a production sharing contract. Sections 167 to 171 give entitlement to allowances and prevent the transfer being a disposal event.

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