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‘Today we are presenting a major package of measures to maintain activity in the oil and gas industry and the supply industry. We are proposing temporary targeted changes to the taxation system to make it possible to carry out planned projects. In addition, we are proposing a green restructuring package,’ said Prime Minister Erna Solberg.
These measures are intended to help the oil and gas industry and the supply industry to maintain activity during the coronavirus crisis. Another package of measures will also be presented to ensure progress towards Norway’s green transformation.
The petroleum industry is Norway’s largest and most important industry in terms of share of value added, state revenues, export value and investments.
‘We have known for a long time that investments on the Norwegian continental shelf will fall. The Government is seeking to make the Norwegian economy less dependent on oil, but it is vital to ensure that the crisis we are now experiencing does not result in such a sudden and deep decline that we lose valuable expertise that we need for the transformation of Norway’s economy,’ said Ms Solberg.
The COVID-19 pandemic and the restrictive infection control measures that have been introduced both in Norway and in the rest of the world have severely affected the global economy. The oil market is volatile and prices have plunged. As a result, investments are grinding to a halt. On the Norwegian shelf, both planned developments and ordinary maintenance are being postponed. Orders are not materialising and there is a great deal of uncertainty.
‘The petroleum industry has been one of the main engines of the Norwegian economy for more than 50 years. If we lose the growth potential of this industry, we will also lose much of the momentum in Norway’s transformation. We must transfer investments, capital, networks and knowledge to emerging and new industries,’ said Ms Solberg.
The Government is proposing temporary amendments to the petroleum tax system.
‘To encourage activity and safeguard jobs in this difficult situation, we are proposing some temporary amendments. In practice, these will mean that tax bills are postponed and companies’ liquidity is improved. This will enable oil and gas companies to make more investments,’ said Minister of Finance Jan Tore Sanner.
The liquidity effect of the changes in taxation may free up as much as NOK 100 billion for investments in 2020 and 2021. The effect in practice in the time ahead will depend on what investments the companies actually make.
‘We are still expecting petroleum investments to fall in the years ahead, but this proposal will mean that the decline is not so steep. Norway will be able to retain jobs and valuable expertise. This will curb the decline but not prevent restructuring,’ said Mr Sanner.
The Government will also propose a green restructuring package for the business sector. This will include increases in funding for Enova, for research, development and innovation, and for green shipping.
‘We will also present a green restructuring package to maintain the momentum in Norway’s green transformation. Measures of this kind are essential if we are to ensure cuts in greenhouse gas emissions and at the same time secure and create new green jobs. These measures are intended both to support the oil and gas industry and to help the supply industry to continue its green transformation. The package will include more funding for research, development and innovation. This will enable us to retain and develop high-tech clusters that will play an important role in Norway’s green transformation,’ said Minister of Trade and Industry Iselin Nybø.
The details of the green restructuring package will be announced when the Government presents a package of measures for its COVID-19 exit strategy towards the end of May.
‘The Norwegian oil and gas industry and supply industry are now in the midst of a crisis unlike anything else we have experienced. Field developments and large-scale maintenance projects are the basis for much of the activity in the supply industry. The measures we are presenting now are a like a shot in the arm, an incentive to carry out more development projects on the Norwegian continental shelf than would otherwise have been possible. Keeping up activity of this kind will safeguard jobs and maintain Norway’s competitive position along the whole value chain in our largest and most important industry. Our actions will also ensure continued value creation from our oil and gas resources and revenues to maintain our welfare system,’ said Minister of Petroleum and Energy Tina Bru.
The price of CO2 emissions has dropped as a result of the coronavirus crisis, since the carbon price – in other words the price of emission allowances – in the EU Emissions Trading System has fallen.
‘The Christian Democratic Party considers it vital to save jobs and retain the expertise Norway needs to achieve the green transformation. By increasing the carbon price to counteract the drop in the price of emission allowances, we are trying to ensure that companies’ emission costs remain at about the same level as before the crisis. This will help to maintain the economic incentives for electrification on the continental shelf,’ said Minister of Children and Families Kjell Ingolf Ropstad.
Proposed temporary amendments to petroleum taxation:
- Oil and gas companies will be allowed to deduct investments, including uplift, from the special tax base immediately. Uplift will be reduced from 5.2 % for each of the first four years to 10 % for the first year only. This will apply to investment costs the companies incur in 2020 and 2021, and to investments included in plans for new developments (PDOs/PIOs) that are submitted by the end of 2021 and approved by the end of 2022, and until production starts. These amendments will not apply to investment costs the companies incur after 2024.
- The companies will be able to have the tax value of losses in the income years 2020 and 2021 refunded.
- The Ministry of Finance will assess these amendments with reference to the EEA Agreement.
- The Government will submit these proposals in the form of a bill to the Storting on 12 May.
- The Government will also present a green restructuring package for business and industry towards the end of May.