Norway Presents Measures to Support Oil and Gas | Rigzone
Norway Prime Minister Erna Solberg has announced a “major package” of measures to help the oil and gas industry and supply sector.
“We are proposing temporary targeted changes to the taxation system to make it possible to carry out planned projects,” Solberg said in a government statement.
“In addition, we are proposing a green restructuring package,” Solberg added.
The measures are intended to help the oil and gas industry and the supply industry to maintain activity during the coronavirus crisis, according to the Norwegian government, which said the liquidity effect of the changes in taxation may free up as much as $9.6 billion (NOK 100 billion) for investments in 2020 and 2021.
The government said it will submit its taxation proposals in the form of a bill to the Storting on May 12. A green restructuring package for business and industry will also be presented towards the end of May.
Largest and Most Important Industry
According to the Norwegian government, the petroleum sector is Norway’s “largest and most important” industry in terms of share of value added, state revenues, export value and investments.
“The petroleum industry has been one of the main engines of the Norwegian economy for more than 50 years,” Solberg stated.
“If we lose the growth potential of this industry, we will also lose much of the momentum in Norway’s transformation. We must transfer investments, capital, networks and knowledge to emerging and new industries,” Solberg added.
Oil investments are “grinding to a halt” due to the pandemic, the government outlined. On the Norwegian shelf, both planned developments and ordinary maintenance are being postponed, orders are not materializing and there is a “great deal” of uncertainty, according to the government.
Norway’s Minister of Petroleum and Energy, Tina Bru, said the Norwegian oil and gas sector and supply industry are now “in the midst of a crisis unlike anything else we have experienced”.
“Field developments and large-scale maintenance projects are the basis for much of the activity in the supply industry,” Bru said in a government statement.
“The measures we are presenting now are a like a shot in the arm, an incentive to carry out more development projects on the Norwegian continental shelf than would otherwise have been possible,” Bru added.
“Keeping up activity of this kind will safeguard jobs and maintain Norway’s competitive position along the whole value chain in our largest and most important industry,” Bru continued.
Extremely Rare Changes
Derek Leith, Global Oil and Gas Tax leader for EY, said, it is extremely rare for there to be changes to the Norwegian upstream tax regime.
“The proposals announced demonstrate the concern that the current slump in oil price, and likely overhang of excess supply into 2021, could have a lasting detrimental impact on the sector in Norway without some sort of fiscal response,” Leith said in a statement sent to Rigzone.
“The measures are temporary but effectively change the upstream regime into a cash flow tax for two years with the ability to monetise any trading losses arising in that period,” he added.
Leith went on to say that providing support in this way ought to preserve investment in projects and underpin activity in the oilfield services sector.
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