Norway threatens to weaken tax breaks

Norway’s government could reduce tax breaks to petroleum investors on the Norwegian continental shelf.

Offshore staff

STAVANGER, Norway – Norway’s government could reduce tax breaks to petroleum investors on the Norwegian continental shelf.

According toStatoil, a proposed reduction in the uplift in the petroleum tax system from 7.5% to 5.5% would lower tax deductions on activities on the shelf by NOK 38 million ($6.5 million) out of every NOK 1 billion ($172 million) invested. The measure is due to be presented tomorrow in Norway’s revised national budget.

The impact on Statoil’s operating cash flow would be below NOK 500 million ($86 million) in 2013, gradually ramping up to take full effect after four to five years.

Torgrim Reitan, the company’s CFO, said: “The change in the Norwegian petroleum tax reduces the attractiveness of future projects, particularly marginal fields, and raises questions regarding the predictability and stability of the fiscal framework for long-term investments on the Norwegian continental shelf.”

The government has also proposed a transition rule for projects where the Ministry of Petroleum and Energy has received a plan for development and operation or a plan for installation and operation prior to May 5, 2013. In these cases the current uplift of 7.5% will still apply.

5/06/2013

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