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September 1, 2021

Norway looking to restructure taxation of oil and gas firms

The proposed restructuring would be adapted to the oil and gas developments on the Norwegian continental shelf.

By Archana Rani

The Norwegian Government is planning to overhaul the petroleum tax system for the oil and gas industry by abolishing some incentives.

The government also plans to phase out the reimbursement system for exploration costs.

Introduced in 2005, the reimbursement system was launched with the aim of reducing financial risk while encouraging exploration.

The government is also proposing to raise a special tax rate to be paid by the oil firms to 71.8% from the current 56%.

Norwegian Finance Minister Jan Tore Sanner said: “The restructuring will make the tax system for the oil and gas business better adapted to developments on the Norwegian continental shelf in the years ahead.”

From next year, the government will replace the depreciation and uplift rules in the special tax for petroleum by immediate expense recognition of investments, or cash flow tax.

However, the government intends to retain the overall tax rate at 78%.

Sanner added: “The changes mean that the tax conditions will be tighter and have a more neutral effect on investments. At the same time, we are making sure that companies have predictable framework conditions.”

The ministry is planning to submit the proposal for consultation within a week.

In an email, Greenpeace Norway head Frode Pleym said: “The measures mean the start of a much-needed change away from climate-hostile and unprofitable oil exploration.”

Last year, the Norwegian Parliament launched temporary incentives for oil firms to help in developing reserves amid a decrease in fuel price during the Covid-19 pandemic.

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