Petroleum Royalties (Relief) and Continental Shelf Act 1989

The Act had two purposes, firstly to end royalties for new fields in the southern basin of the North Sea as well as onshore. This implemented a commitment made by the Government in the 1988 Budget statement.[1] Secondly, it implemented the agreement that the United Kingdom Government had reached with the Republic of Ireland on the determination of the continental shelf.[1]

The Government's policy was to keep the North Sea fiscal regime under review and to make changes where appropriate to ensure that the right climate existed for further exploration and development. There were a number of significant gas prospects in the southern basin of the North Sea which were economic before tax but uneconomic in the then current fiscal regime.[1] For example, in early 1988 Hamilton Brothers had announced, directly as a result of the Government's intention to abolish royalties in the southern basin, to develop the Ravenspurn North field. The development represented an investment of £600 million in 1.5 trillion cubic feet of gas reserves which would not otherwise have taken place.[1]

The Act also ended royalties for new onshore fields to encourage onshore development.

Section 1 exempted new fields in the southern basin and onshore from royalties as from 1 July 1988.[2] Section 2 ensured that the exemption granted for new fields in the North Sea applied to subsequent licences.[2]

The Act's second purpose enabled the United Kingdom to implement the agreement negotiated with the Irish Republic on the delimitation of the continental shelf.[1] The agreement resolved an issue which has been outstanding since the enactment of the Continental Shelf Act 1964. The Government had powers to designate areas for offshore activity on the UK continental shelf, but not powers to de-designate. There were areas off the west coast of Scotland which had been claimed by both sides.[1] After negotiation, it was agreed that the Republic of Ireland should give up some of its claim and so would the UK. However, the UK did not have the necessary powers, this was dealt with in Section 3.[2]

The Petroleum Royalties (Relief) and Continental Shelf Act 1989 (1989 c. 1)[2] received Royal Assent on 7 February 1989. Its long title is: ‘An Act to confer on holders of certain petroleum licences an exemption from royalties (including royalties in kind) in respect of petroleum from certain onshore and offshore fields and to confer power to amend the Continental Shelf (Designation of Additional Areas) Order 1974 to give effect to an Agreement made between Her Majesty’s Government in the United Kingdom and the Government of the Republic of Ireland relating to their respective rights in relation to the continental shelf.’

The 1989 Act was subject to minor amendments[2] by the Continental Shelf Act 1989 and by the Petroleum Act 1998.

• Oil and gas industry in the United Kingdom
• North Sea Oil
• Petroleum Act