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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2015
33
25.
PROVISIONS
2015
2014
USD 000’s
USD 000’s
Decommissioning provisions
12,397
12,433
Retirement benefit obligations
3,061
3,264
15,458
15,697
a)
Decommissioning provisions
The movements in the decommissioning provision over the year is as follows:
2015
2014
USD 000’s
USD 000’s
At 1 January
12,433
3,013
Unwinding of discount
362
104
New provisions and changes in estimate
(398)
9,316
At 31 December
12,397
12,433
The provision for decommissioning
relates to two of the Group’s fields and
is based on the net present value of the
Group’s share of the expenditure which may be incurred at the end of the producing life of each field (currently estimated
as being 2018 and 2023 for the two fields respectively) in the removal and decommissioning of the facilities currently
in place. Assumptions, based on the current economic environment, have been made which management believe are a
reasonable basis upon which to base the provision. These estimates are reviewed regularly to take into account any
material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market
prices for the necessary decommissioning works which will reflect market conditions at the relevant time. Furthermore,
the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates. This
in turn will depend upon future oil and gas prices, which are inherently uncertain. The Group uses a discount rate of 5%
in arriving at the future value of decommissioning provisions.
b) Retirement benefit obligations
The Group has a post-employment defined benefit obligation towards its non-Kuwaiti employees which is an End-of-
Service (ESB) plan governed by Kuwait Labor Law. The entitlement to these benefits is conditional upon the tenure of
employee service, completion of a minimum service year, salary drawn etc. The Group also has a defined benefit
obligation in respect of the Block 5 in Yemen. These are unfunded plans where the group meets the benefit payment
obligation as it falls due.
The movement in these defined benefit obligations over the year is as follows:
2015
2014
USD 000’s
USD 000’s
At 1 January
3,264
3,243
Current service cost
1,486
1,066
Re-measurements:
Experience gains
(445)
(812)
Benefits paid
(1,244)
(233)
At end of the year
3,061
3,264
The significant actuarial assumptions were as follows:
2015
2014
Discount rate
4%
5%
Salary growth rate
5%
6%
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