Rating Manual section 6 part 3: valuation of all property classes

Section 745: onshore oil and gas fields

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Responsibility and Co-ordination

1.1 Onshore Oil and Gas Production Assessments

Mineral Valuers are responsible for the valuation and maintenance of the assessment of:-

a. Oil and Gas Production Hereditaments.

b. Well head Sites.

c. Gathering Stations.

1.2 Pipelines associated with Onshore Oil and Gas Fields

Pipelines as a group are dealt with in Section 6 part 3 Section 780 of the Rating Manual.

Onshore oil and gas fields generally include pipelines connecting individual well-head sites or a series of well-head sites to a gathering station. Additionally further pipelines may link the gathering station to a refinery, rail-head depot or other disposal point.

The responsibility for the valuation and maintenance of the assessment of pipelines connecting well-head sites and gathering stations lies with the Mineral Valuer. Close liaison with the SVU pipeline valuer will however be required and it may be necessary for both the Mineral Valuer and the SVU pipeline valuer to become involved in any appeal hearings. The SVU pipeline valuer will retain responsibility for the valuation of pipelines from the gathering station to refineries, rail head depots, or other disposal points.

2. Description

2.1 The Property

A typical onshore complex consists of several well-head sites each comprising one or more wells or boreholes sunk vertically or inclined to an underlying reservoir or reservoirs. Each well-head site may include its own facilities to process or partly process the petroleum into separate saleable and waste products. There may, however, be a central plant or gathering station where this process is undertaken or completed and from which the well sites may be controlled. The gathering station may be located at a well-head site or may exist as a separate unit fed directly by pipelines from the well-head sites or otherwise serviced by road tanker. From the gathering station the end products may be removed by pipeline or by road. Alternatively the products may be piped onwards to a rail terminal from where the product is removed by rail transport. There may also be a water extraction and pumping plant; storage premises; interconnecting pipelines, conduits and cables. Pipelines connecting to rail terminals or other disposal points may be of considerable lengths.

Several pipes, conduits and cables may run together within an area of land in one or more trenches. The numbers, types and sizes of the pipes, conduits and cables will vary according to their separate purposes, eg: carrying oil from well-head sites to a gathering station; seawater to a gathering station; waste water from gathering station to well-heads; separated gas from gathering station to well-heads; stabilised oil, gas or liquid petroleum gas from gathering station to disposal point; electrical cables supplying or transmitting generated power; pipes and conduits carrying other services.

3. Survey Requirements

3.1 Buildings

The buildings housing process plant are similar to conventional industrial buildings and should be referenced accordingly. In addition there are a range of support buildings such as offices, laboratories, control rooms etc.

3.2 Plant and Machinery

The plant comprises mainly steel vessels, heat exchangers and tanks, the vast majority of which will be excluded from rateability by virtue of exceptions (a) to (d) to Class 4 of the Valuation for Rating (Plant and Machinery)(England) Regulations. Most of these items are however supported by structural steelwork and it is anticipated that all but the smallest of items will include elements in respect of foundations, settings, fixed gantries supports, platforms and staging. It is considered likely that the gathering stations will also be equipped with extensive fire fighting systems incorporating both foam and water and including ring sprays on the storage tanks. These fall to form part of the hereditament by virtue of Class 2 Table 2 (f). It should also be noted that fire protection may be incorporated in supporting structural steelwork.

4. Basis of Valuation

The rateable value of onshore oil and gas fields will include the following elements:-

  1. A royalty rate derived from available evidence applied to the quantity of oil and gas produced.

  2. A site rent for the various occupations based on available evidence.

3. A value derived from the contractor’s basis for the wells with their rateable casings and liners; for other rateable plant and machinery; for buildings and for other site improvements.

  1. Pipelines which are rateable in accordance with Valuation for Rating (Plant and Machinery) (England) Regulations should be valued on the contractor’s basis, pipeline easements dealt with on a rentals basis. Relief under Regulation 5 of the Non Domestic Rating (Miscellaneous Provisions) Regulations 1989 will apply to the pipeline land used in the conveyance of untreated mineral to a processing facility.

  2. Gathering Stations: buildings, plant and machinery will generally be assessed using the contractor’s basis. Associated land will be dealt with using either rental values or contractor’s basis depending on the availability of suitable rental evidence. Relief under Regulation 5 of the Non Domestic Rating (Miscellaneous Provisions) Regulations 1989 will be applicable to those areas of land used for primary treatment and stabilization of the mineral.

  3. Export Terminals: buildings, plant and machinery will generally be assessed using the contractor’s basis. Associated land will be dealt with using either rental values or contractor’s basis depending on the availability of suitable rental evidence.

4.1 Units of Assessment

Properties such as export pipelines and rail terminals which are beyond the production stage will generally be separate assessments.

Properties involved in oil and gas production and primary processing may either be separately assessed or aggregated. This will depend on the site specific circumstances and the nature of the facilities.

5. Valuation Considerations

5.1 Annual Revision of Mineral Producing Hereditaments

The Local Government Finance Act 1988 Schedule 6 Para 2(6) provides the authority for the assessment of the well-head sites to be reviewed annually to reflect the quantity of minerals or other substances in or extracted from the hereditament.

5.2 Reduction under Regulation 5 of The Non-Domestic Rating (Miscellaneous Provisions) Regulations 1989

Regulation 5 applies to any hereditament:-

  • which consists of or includes a mine or quarry; or

  • the whole or part of which is occupied together with a mine or quarry in connection with the storage or removal of its minerals or its refuse.

Regulation 7 of The Non-Domestic Rating (Miscellaneous Provisions) (No 2) Regulations 1989 extended the definition of mine or quarry to include a reference to a well or borehole, or to a well and bore-hole combined. This extended definition permits the application of the 50% relief to onshore oil and gas fields.