Norway Stands Behind Snohvit Project

The Norwegian government is holding fast to its belief that the tax amendment it introduced last year for the planned Snohvit LNG project does not constitute illegal state aid, a Norwegian finance ministry official said Friday.

"The amendment to the Petroleum Tax Act was considered by the government to be a general amendment to the depreciation rules...the government maintains its position that a general change...does not constitute aid at all," the ministry's director general Stig Sollund said.

Norway is a member of the European Free Trade Association, and the Brussels-based EFTA Surveillance Authority (ESA) has contacted the Norwegian government to clarify the nature of the tax law amendment to see if it is in breach of rules on state aid.

Norway's response to the ESA's initial query was based on the fact that the amendment was not designed specifically for the Snohvit partners, but would be applicable to any large-scale cooling project. The $5.2 billion Snohvit project in the Barents Sea, however, is the only planned development that fits this definition. The ESA has written another formal letter giving Norway until mid-April to either prove that the amendment is not in breach of state aid guidelines or withdraw the amendment.

Once Oslo has responded to this letter, the ESA will either accept the government's position or open a formal enquiry.