The National Audit Office (NAO) has said British taxpayers face a £24 billion bill for tax relief awarded to oil and gas companies removing hundreds of North Sea wells, rigs and pipelines.
The NAO said the figure would climb if companies collapse and are unable to pay for cleaning up their operations, leaving the Government to pay for them.
The industry has contributed to more than £300 billion in tax revenues to the Treasury since the 1960s. North Sea production peaked in the mid 1980s and the late 1990s, and has been declining ever since.
Tax revenue peaked at about 3% of GDP during the 1980s, but slumped as output from the region declined. A combination of low oil prices and decommissioning costs resulted in the industry becoming a net drain for Government funding for the first time in 2016.
The NAO, in a report on the cost of decommissioning the region's oil and gas fields, said the Treasury faced a £24 billion bill because of tax arrangements.
Approximately half of the figure comes from decommissioning reducing companies' taxable profits, with the rest from tax relief based on the large sums of tax paid historically. The relief allows companies to offset decommissioning costs against revenue, cutting the amount of tax they pay on their profits.
The vast majority of the costs will land over the next 20 years, with a small amount falling as late as the 2060s. However this £24 billion estimate was "highly uncertain" as it relied on factors that are hard to predict, such as future oil prices.
The bill could also be bigger if oil and gas companies become insolvent, leaving the Government liable for clean-up costs.
The NAO have commented that: "taxpayers are ultimately liable for the total cost of decommissioning assets that operators cannot decommission".
The report revealed there have been cases of companies defaulting on their clean-up obligations. The Treasury had to pay out £5.4 million in 2016 and £45 million in 2017 for decommissioning because of unnamed companies not meeting the costs.
Decommissioning involves everything from plugged old wells to removing the miles of pipelines on the seabed in the region.
The industry has been set a target of reducing the total costs of decommissioning by 35% in three years' time. However, experts have said this is very ambitious.
Labour said the Government needed to rethink changes last year that allow buyers of oil and gas fields to inherit the seller's tax relief.
The Shadow Treasury Minister, Clive Lewis commented: "the obvious issue looming over all of this is the climate emergency. We know we need to urgently be ending the UK's resilience on fossil fuels, not offering yet more tax breaks for big oil companies".
Oil and Gas UK said it was wholly committed to making decommissioning cost-effective and environmentally responsible.
The Government said it is working to reduce costs, that "by providing tax relief on decommissioning, we are attracting continued investment into our reserves - supporting jobs, boosting the economy and protecting our energy supply"
