Presentation on tax aspects of decommissioning of offshore oil and gas assets

1. Conference re-use and decommissioningof oil and gas platforms in the North Sea.Tax NAM – Jurgen BlankestijnMay 19th, 2011

2. AGENDA Introduction to NAM Applicable Tax Law Tax Law Principles Production Phase Decommissioning Phase Transfer of a License CCS

3. Introduction to NAM 1947 50% 50% 1800 people

4. Introduction to NAM Total Natural Gas production 2009: 69,9 billion m3

5. License holder Results attributable to the license Consolidation Gross SPS Tax rate of 50% Fictitious amount of CIT is deductible from SPS Uplift on Costs of 10% Not all costs are upliftable Applicable Articles CIT / IT Law Not all CIT articles are applicable for the SPS calculation Applicable Tax Law Mining Law 2003 Corporate Income Tax law 1969 and Income Tax Law 2001 3.25 IT/ 8 CIT – GoedKoopmansgebruik or Sound Business Principles

6. Tax Law Principles Sound Business Principles Economic principles unless in conflict with tax law or tax law principles Consistent use over time of principles Costs and benefits are accounted for in the year(s) they relate to Provision: Case Law Baksteenarrest (1998) Facts and circumstances before year end Reasonable assurance that the costs will occur in the future Future expenses are invoked in the period up to and including the balance sheet date

7. Tax treatment of decommissioning costs Entry ticket Decommissioning costs are part of the ring fence for State Profit Share Made at the end of the life time of a well Are related to the production of the well and to the activities during the life time of the well Principles 10% Uplift Ring fenced 3 years carry backward, indefinite carry forward Unit of Production Discounting Remaining Lifetime

8. Production Phase Year End Valuation Approach Uncertainty in techniques Uncertainty in costs Timing Estimated reserves Changes in case law Consistency Comparison Operator Auditable At once: Profit and Loss In the Future: Spread over future years

9. Decommissioning phase When Decommissioning starts … Costs in excess of provision Consolidation 1 year carry back for CIT 3 year carry back for SPS Last license

10. Transfer of a license When a license and assets are sold … Seller Release to the P&L No uplift consequences Buyer Start up from scratch No double uplift uplift uplift

11. CCS When a license is used for CCS … Seller Release to the P&L Taxable at SPS Buyer Start up from scratch Tax deductible at CIT only

12. CCS When a license is used for CCS … Consequence Decommissioning costs only tax deductible at CIT Holding period How about Sound Business Principles? Mining LAW under review

13. Closing remarks Reserve future costs Consolidation Discounting% Limited carry back Last license CCS