OT42380 - Non-residents working on the UK continental shelf: computation of profits: mobilisation and demobilisation activities

It might be necessary to reactivate a drilling rig or vessel after stacking or to modify it to perform a particular offshore contract. The process of modification often takes place before the drilling rig or vessel enters the sector where it is to undertake offshore activities. Occasionally, modification or other technical adjustments may be made when the drilling rig or vessel has reached the location where it is to perform the offshore activities. This process of getting the drilling rig or vessel to a state of readiness to begin the offshore activities is called ‘mobilisation’. At the same time the rig or vessel operator will be recruiting personnel and moving them to the work site.

It is usual in such circumstances for the customer to make a contribution towards the operator’s costs of the mobilisation or demobilisation periods. These contributions, or fees, are usually calculated on the basis of a specified day rate over the respective periods although mobilisation payments are sometimes made as an agreed lump sum (which may or may not have been calculated by reference to a day rate over the anticipated mobilisation period). The treatment of such fees, and related expenses, is covered at OT42400.

The period of mobilisation ends when the rig or vessel contractor notifies the oil company that the drilling rig or vessel is ready to commence the provision of offshore services under the contract. At this point in time, the contractor ceases to receive mobilisation fees, and begins to receive the operating day rate (see OT43170). After completing the contract the rig or vessel may be stood down - ‘demobilised’ - and the personnel re-deployed or paid off.