»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp issue was whether a provision to meet the future costs of reconverting an oil rig, restoring tankers, capping oil wells and removing sea bed installations was capital or revenue expenditure (see BIM62030).

»Ê¹ÚÌåÓýapp company had a 25% interest, under a consortium agreement, in the Argyll field in the North Sea. »Ê¹ÚÌåÓýapp licence to exploit the oil included certain statutory obligations to cap the wells and clear the seabed of the gathering system when a well was abandoned. »Ê¹ÚÌåÓýapp contract for the hire of a drilling rig, to convert into a production platform, contained a requirement to reconvert it back into a drilling rig at the end of the hire period. »Ê¹ÚÌåÓýapp tankers, chartered to transport the oil from the platform to the refinery, had to be modified for this purpose and the agreement contained a requirement that they be restored at the end of the charter period.

It was held that the provision was capital. Vinelott J said that:

‘â€� the same provision will have to be made whether the expenditure when incurred will be expenditure on revenue account or capital accountâ€� »Ê¹ÚÌåÓýapp contract of hire (for the rig) is clearly a capital assetâ€� the charterparties (for the tankers) are equally capital assets and the cost of reconverting themâ€� will be capital expenditureâ€� the manifold and the loading lines and buoy are again part of the apparatus that had to be installed before the operationâ€� could beginâ€� It makes no difference in this connection whether the obligation to remove the clutter is seen as imposed by the licence or by the legislation in pursuance of which the licence was grantedâ€� I cannot see that any distinction can fairly be drawn between the boreholes, well heads and flow lines on the one hand and the rig, manifold and the loading lines on the other hand. All are part of a comprehensive installation designed to obtain access to and win and transport oil from the oilfield to onshore facilities.â€�