OT05422 - PRT: valuation of non-arm's length disposals and appropriations - gas - valuation of light gases from 1 January 1994 - no inter-affiliate agreement

Although such agreements are almost invariably drawn up, arrangements would be needed in case there were any ‘informal’ transfers. In these cases LB Oil & Gas looks at all the circumstances and evidence available including the likely production profile of the field, the use to which the affiliate put the gas and the volumes it was likely to take in the future. LB Oil & Gas then proposes a basis for pricing that gas in the light of the market conditions at the time of the first supply and if necessary for each subsequent chargeable period. If the supply and the nature of the market were such that a long term contract were to be expected then the valuation would be on a long term basis but this should be reviewed on a regular basis in the light of any new information.

In the exceptional case where little information is available (e.g. if the company fails to supply it or if it cannot give any meaningful detail because it has no specific plans for the future) then the gas may need to be valued on a period by period basis.