On April 28th, all 22,500 tonnes of Shell’s Brent Delta oil rig in the North Sea were raised off their concrete struts, loaded onto a ship and transported to a Hartlepool decommissioning site.

The move highlights a sea change in the oil industry away from prioritising exploration and production and towards a less certain future.

Over recent years, oil prices have plummeted from a 2014 high of $114 (£91) per barrel to just $50 (£39), reflecting both a global glut in supply and a dip in demand. It helped to make 2016 a special year.

The value of subsidies, calculated upon the basis of historical tax paid by corporations outweighed the year’s taxes paid to the government. Subsequently, it was the first time that the sector has actually provided a net loss for the national economy.

Well-drilled professionals

With the volatility of oil prices affecting margins, greater significance is being placed on leanness and efficiency in the field. Increasingly specialist accountants are being relied upon to interpret the more flexible aspects of corporations’ obligations.

“Upstream oil activities are unique and require special accounting treatment,” explains Dr. Ayodele Asekomeh, Senior Lecturer in Energy Finance and leader of the MSc Oil and Gas Finance course, at Robert Gordon University. “There is no single accounting standard for dealing with such transactions, but standard-setting bodies have provided guidelines for how to treat exploration and evaluation costs.”

Despite the challenges presented by an erratic market, accountants in the oil industry are identifying new opportunities to streamline financial activities and therefore maximise profits for their clients.

Rebates now allow for oil corporations to claim between 50 and 75 percent of decommissioning costs, depending on their tax history, back from the government as relief.

For the trade as a whole, this windfall will likely amount to as much as £24bn in the coming years. It’s a big pot and it will be the role of accountancy professionals to identify how to access the higher end of that bracket for their employers.

Slick legislation

Oil from beneath the North Sea is extracted under the tax revenue jurisdiction of an economic zone distinct to the British mainland known as the UK Continental Shelf (UKCS). Technically speaking, the UKCS is not part of the UK and falls outside the boundaries of British territorial waters which extend 12 miles off-shore.

Consequently, the regulations on which taxes that oil companies have to pay when they operate on the Continental Shelf can differ substantially from the normal rules. Often the directives fluctuate depending on the political environment at the time, and this is something that accountants have to be prepared to tackle.

“Accountants need to have a good understanding of fiscal policies and the objectives of the government,” says Asekomeh. “Knowledge of broader social, economic and environmental issues, as well as the implications of contractual arrangements with foreign entities are also important.”

Providing scaled service in the industry

However, the work of accounting professionals within the oil industry is not always geared towards larger companies. The sector is awash with contractors whose workers hail from a long list of homelands. From drilling to welding, maintenance to catering, these contractor firms vary in size and function and the demands on their accounts and taxation are equally diverse.

“The question is mainly one of determining residence for tax and national insurance,” says Asekomeh. “These determinations consider whether workers are employed by a UK company, whether they are UK nationals, and whether their work is performed in a territory that has a Double Taxation Agreement with the UK. Special rules apply accordingly.”

Managing the accounts of businesses who have a multinational workforce requires a specialised base of knowledge to avoid under or overpayment as mistakes have the potential to cost clients both their money and reputation. Meticulous planning and the ability to adapt to legislative change are key skills to foster for any aspiring accountant in the sector.

The oil industry is in a significant period of change and with a new outlook comes the need for new blood. Without more expert accountants to decipher increasing levels of legislative change, it won’t be an easy prospect to make a living chasing black gold.

Jesse Onslow Norton is a writer, editor and communications consultant at Flibl. A former coder, his editorial work focuses on fintech, digital transformation, policy and regulation. His clients include corporations, governments, startups and SMEs from across the world. Follow him on Twitter @JesseOnslow.