OT05445 | PRT: valuation of non-arm's length disposals and appropriations - gas - gas banking

The problems of marrying supply requirements to production have given rise to arrangements under which a gas field can act as banker for gas produced by another field. The producer fields using the arrangements feed gas into a common supply system, the banker field regulating its own production to ensure that demand is just met. This allows the banking field to enter a disposal contract which requires a flatter profile than the field itself could manage. When production from a banking field exceeds its contractual disposals the excess is regarded as having been banked; at other times any short-fall is regarded as made up by a withdrawal from the bank. (Note - the banking arrangements only amount to an accounting mechanism and do not reflect the physical movement of gas in the reservoirs.)

The participators in a gas banking scheme can elect for special PRT provisions to apply which effectively mirror the commercial arrangements just described. Under these provisions the amounts sold to the customer are treated as PRT disposals whether they are actually met by the producer’s current gas production or by ‘withdrawals’ from the bank, and any production which is ‘banked’ does not contribute to PRT gross profits at that time. This treatment applies not only to the calculation of gross profits, but also to the calculation of the amount of oil won and saved and the cash equivalents of the oil allowance and exempt allowance. The relevant legislation is at FA80\S108, SI82\92\3(2), SI82\92\3(3).