Analytical Instrumentation

  • How Does Norway Help Oil Companies?

How Does Norway Help Oil Companies?

Mar 16 2018 Read 1082 Times

Norway may be considered one of the most expensive countries on the planet, but it knows a thing or two about how to protect its economy. Not only does it have a sovereign wealth fund worth an estimated US$1 trillion, but it also champions a far-sighted oil and gas tax regime designed to ensure future wealth.

Currently, Norway offers oil and gas companies 78% reductions on exploration costs from taxable income. Furthermore, it offers cash reimbursements for companies that don't report any taxable income. To date, the government has issued more than 100 billion Norwegian crowns in reimbursements, the equivalent of US$12.54 billion. While this is good news for oil and gas companies, the policy has received its fair share of criticism from environmental groups.

Norway slammed over Arctic exploration

The system has garnered fierce criticism from Norwegian environmental group Bellona, as well as global organisations like Greenpeace. As well as accusing the government of supporting oil and gas exploration in the Arctic, they maintain that the up-front cash flow reimbursements breach state aid rules as outlined by the EEA. Bellona went as far as to get the European Free Trade Association (EFTA) involved, though ultimately the Norwegian finance ministry emerged unscathed.

“The Ministry maintains that the Norwegian rules on reimbursement of exploration costs and interest on carry forward of losses ... do not constitute state aid under Article 61 of the EEA Agreement, and are therefore in compliance with the EEA (European Economic Area) law,” asserts the ministry.

A "pay out now, reap the benefits later" approach

While US$12 billion is an enormous sum, the ministry maintains that it eventually recoups the benefits in the form of future tax payments.

“This means that if income is derived from petroleum activity taxed at a rate of 78%, the state, through the tax system, should cover a corresponding share of the cost incurred to earn this income,” explains a ministry representative.

Concerns over "botch" investments

Bellona isn't convinced, stressing that as the country's tax collector, the ministry of finance should not gamble such vast sums based on future gain. While the government is encouraging more exploration in the Arctic Barents Sea, Bellona maintains that in the face of climate change these reserves should remain untouched. As a result, there will be no future income and Norway will never recoup the exploration benefits it handed out in the past.

For more insight into the latest oil and gas industry news don't miss 'Shimadzu Gas Chromatography Solutions for Hydrocarbon Processing Industry.'

Reader comments

Do you like or dislike what you have read? Why not post a comment to tell others / the manufacturer and our Editor what you think. To leave comments please complete the form below. Providing the content is approved, your comment will be on screen in less than 24 hours. Leaving comments on product information and articles can assist with future editorial and article content. Post questions, thoughts or simply whether you like the content.

Post a Comment

Digital Edition

Petro Industry News March 2019

March 2019

In This Edition Fuel For Thought - Dr. Raj Shah presented with multifarious laurels - International partnership develops new real-time lubricant monitoring system - Ashtead Technology strik...

View all digital editions


Scientific and Technical Conference

Apr 23 2019 Mozyr, Belarus


Apr 23 2019 Moscow, Russia

Expo Gas

Apr 24 2019 Kielce, Poland

securika Kazahkstan

Apr 24 2019 Almaty, Kazakhstan

View all events