OT12150 - PRT: supplement - bringing about the commencement: searching for oil

OTA75\S3(5)(a)

The Chief Secretary to the Treasury stated in February 1975, during the passage of what became OTA75, that ‘supplement is clearly allowable for the cost of searching for a field’. Indeed, OTA75\S3(5)(a) (see OT12100) will generally allow supplement in respect of all searching expenditure allowable under OTA75\S3(1)(a) up to field discovery.

After discovery, much of the drilling, seismic and geological and geophysical work in areas inside or near the field boundary will be in the nature of appraisal or ascertaining in which case allowance of the expenditure and supplement will need to be considered in accordance with OTA75\S3(1)(c) (see OT12300) and OTA75\S3(5)(b) (see OT12250).

It may be that exploration drilling outside a discovered field will be aimed at a separate structure. In such a case expenditure will be allowable in a field within 5km of the location of the well given that OTA75\S3(1)(a) is based on geography rather than field purpose. However, OTA75\S3(5)(a) requires a field purpose, so if that cannot be established (e.g. because the drilling is aimed elsewhere), supplement will not be allowable.

Exploration and Appraisal, OTA75\S5A

If searching expenditure is claimed under OTA75\SCH7 (rather than OTA75\SCHS5-6), supplement cannot be claimed, see OT13975).