§ Mr. Formanasked the Chancellor of the Exchequer whether he will make a statement about the proposed petroleum revenue tax treatment of payments to producers of seasonal supply gas.
§ Mr. MooreYes. A seasonal supply gas field —otherwise known as a low load factor gas field—is one intended to supply gas only, or predominantly, at times of high winter demand by consumers. New forms of contractual arrangements have been developed for such fields involving not just a payment for each unit of gas produced—a "commodity charge"—but also a payment made at periodic intervals whether any gas is produced or not—a "capacity charge". In return the supplier agrees to deliver specified quantities of gas at short notice if the purchaser so requires. The existing petroleum revenue tax legislation would not charge the "capacity charge" as received by the producer but would require deliveries of gas to be valued at a level taking account of both the "commodity" and "capacity" elements of the contract. This would be difficult to operate and produce a number of anomalous results. Accordingly, we intend to legislate in the 1984 Finance Bill to ensure that a capacity charge will be treated for PRT as a payment for gas for the period in which it is received. It is also intended to treat the capacity charge in the same way for royalty.