Norwegian government proposes overhaul of petroleum tax system (updated)

Sparebank 1 Sorost-Norge

31/08/2021 19:10

(Adds details of proposal, analyst comment, Greenpeace)
    By Nora Buli and Nerijus Adomaitis
    OSLO, Aug 31 (Reuters) - The Norwegian government has
proposed overhauling the taxation system for the petroleum
industry, which has been in place since 2005, cutting
reimbursements for exploration costs, Finance Minister Jan Tore
Sanner said on Tuesday.
    "The changes mean that the tax conditions will be tighter
and have a more neutral effect on investments. At the same time,
we are making sure that companies have predictable framework
conditions," Sanner told a news conference.
    Norway is western Europe's largest oil and gas producer and
companies operating on the Norwegian continental shelf include
Equinor  EQNR.OL , Shell  RDSa.L , TotalEnergies  TTEF.PA ,
ConocoPhillips  COP.N , as well as Aker BP  AKERBP.OL  and
Lundin Energy  LUNE.ST . 
    Under the proposal, a special tax rate paid by oil firms
will effectively be raised to 71.8% from 56% currently, but the
overall tax rate would remain at 78%, the finance ministry said.
    The proposal would also phase out the reimbursement system
for exploration costs, which was introduced in 2005 to reduce a
financial risk, especially for smaller players, and to encourage
exploration.
    "It looks like that it would reduce tax deduction from 89.6%
to 78% on investments. How would it affect investments appetite,
it would depend on the discount rate," said Teodor Sveen-Nilsen,
an analyst from the Sparebank 1 Markets.  
    Meanwhile, environmentalists welcomed the tax changes.
    "The measures mean the start of a much-needed change away
from climate-hostile and unprofitable oil exploration," Frode
Pleym, head of Greenpeace Norway, said in an email.
    Environmentalists and some opposition parties have called on
the government to stop all exploration on the Norwegian
continental shelf to reduce greenhouse emissions.
    According to the latest opinion polls, the centre-right
minority government is set to lose the Sept. 12-13 parliamentary
elections, with climate change and the future of Norway's oil
and gas industry at the centre of the debate.  urn:newsml:reuters.com:*:nL8N2PJ3XF
    The main opposition Labour party, which is set to win the
elections, said it needed more time to study the proposals,
deputy leader Hadia Tajik told the NTB news agency. 
 ($1 = 8.6903 Norwegian crowns)

 (Reporting by Nora Buli Nerijus Adomaitis; Editing by David
Goodman and Grant McCool)
 ((nerijus.adomaitis@thomsonreuters.com; +47 9027 6699; Reuters
Messaging: nerijus.adomaitis.thomsonreuters@reuters.net))