Norway Introduces New Tax Measures for the Oil Sector

There are still large opportunities on the Norwegian continental shelf for long-term activity and value creation. However, we are facing substantial challenges. The Government's initiatives are aimed at increased exploration activity, increased oil and gas recovery from existing fields and reduced costs. In addition to a broad effort from the industry, these initiatives are necessary in order to achieve a long-term profitable development, says Einar Steensnaes, Minister of Petroleum and Energy.

In the white paper proposed to the Storting today, the Government will introduce measures to increase exploration activity. In the latest licensing rounds the industry has been given substantial new acreage. The Government will continue with a flexible exploration policy in order to obtain faster and more efficient exploration.

It is important to increase oil and gas recovery from existing fields. The Government supports the industry's efforts towards more efficient operations. Initiatives with regard to supply bases and operation organizations will also be considered.

The Government proposes an adjustment of the petroleum taxation. This will amongst other things contribute to increased exploration and increased oil and gas recovery from existing fields. The adjustments include acceleration of the investment uplift and the establishment of an arrangement for the direct compensation of the tax value of the companies' exploration expenses. This was presented earlier today by the Ministry of Finance in the Revised National Budget.

The cost level must be reduced. Industrial parties have the main responsibility. The Government will support their efforts. A review of the overall regulatory regime will also be initiated.

The Government will continue to emphasize on research and development by increasing the Research and Innovation Fund by 1 billon NOK. The increased returns will be employed in long-term basic research applicable to the petroleum sector. This will contribute to a further development of the competence in the Norwegian petroleum cluster.

The petroleum sector is Norway's largest and most important economic activity. The sector still represents considerable value creation which will continue for many years. We are, however, visualizing a gradual reduction in the activity level. The Government's goal is to achieve a long-term profitable development of the resources on the Norwegian continental shelf. This represents oil production for more than 50 years and gas production for an even longer period.

There are great challenges attached to the realization of long-term value creation on the Norwegian continental shelf. The exploration activity has been reduced. Fewer exploration wells have been drilled during the latest years and the average size of discoveries has declined. Compared to the recent years no major discoveries are in pipeline for development. The oil production is declining. Many mature fields are characterised by declining production and increasing unit costs. Compared with that of other petroleum provinces the Norwegian cost level is very high. This affects profitability.

The Government decided to allow for further all-year petroleum activity in the Barents Sea, except for certain especially valuable areas. The decision not to continue further petroleum activity in the area Nordland VI was taken. This decision was made based on the Environmental Impact Assessment Study of all-year petroleum activities in the area Lofoten - Barents Sea (ULB).