Statoil Says Tax Proposal Not Very Future-Oriented

The Norwegian government has today, May 11th, presented its revised national budget for 2004 and White Paper no 38 on petroleum activities. The government proposes some adjustments in petroleum taxation, including accelerated uplift.

Statoil is disappointed that the government has only met the oil industry's wishes to a limited degree in its proposal for tax changes.

"The proposed changes are a step in the right direction, but with the proposal which has now been presented it will be difficult to secure an optimal utilization of resources and value creation on the Norwegian continental shelf," comments acting chief executive Erling Øverland.

The group still has great faith in the Norwegian continental shelf (NCS), both in terms of opportunities for new finds and improved recovery from producing fields. Its aim is to continue to develop projects which will be profitable for its owners and the Norwegian community.

A number of new projects are demanding to realize. This is partly because considerable investment is required to realize smaller volumes. The government's proposal is however not sufficient to increase interest in new projects. These are projects which entail much greater risk than has previously been encountered on the NCS.

"We will continue to promote new developments, and do what we can to reduce costs," states Mr. Øverland. "But decision-making in the licenses may be more difficult due to the low priority assigned to the NCS by the various players."

The industry's own tax proposal did not entail tax relief, but incentives to implement projects which will not be realized with the current frame conditions. This could have led to more projects being realized, with opportunities for increased value for the community and owners. Lower levels of activity may lead to a further reduction in the number of jobs in the petroleum industry in the future. Supplier companies will be the first to notice a decline in activity.

Mr. Øverland emphasizes that the proposal put forward by the industry would have helped increase overall activity and value creation, which in turn would mean increased tax revenues.
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