Norway proposes temporary tax break to stimulate offshore projects
The Norwegian government is working on measures to maintain activity levels across the country’s oil and gas industry and the supply industry during the coronavirus crisis.
These include temporary targeted changes to the taxation system to allow planned projects to go forward, and a proposed ‘green restructuring’ package.
Prime Minister Erna Solberg said: “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.”
Certain planned developments and routine maintenance programmes offshore have been postponed, and there is growing uncertainty in the sector with new orders not materialising.
The temporary amendments include postponement of tax bills to improve general liquidity and allow offshore oil and gas companies to commit to more investments, according to Minister of Finance Jan Tore Sanner. This change could free up NOK100 billion (US$9.59 billion) for spending programmes in 2020 and 2021.
Oil and gas companies will be allowed to deduct investments, including uplift, from the special tax base immediately.
The uplift will fall from 5.2% for each of the first four years to 10% for the first year only. This measure will apply to investment costs the companies incur in 2020 and 2021, and to others included in plans for new offshore developments submitted by the end of 2021 and approved by the end of 2022, and until production starts.
Companies will also be able to seek refunds on the tax value of losses from income years 2020 and 2021. The government will submit these proposals in the form of a bill to Norway’s parliament (Storting) on the 12th May.
“We are still expecting petroleum investments to fall in the years ahead, but this proposal will mean that the decline is not so steep,” Mr Sanner said. “Norway will be able to retain jobs and valuable expertise. This will curb the decline but not prevent restructuring.”
The government’s green restructuring measures include increases in funding for the state-owned Enova institute, R&D, 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.
Towards the end of this month the government will provide more detail when it announces its COVID-19 exit strategy.
Minister of Petroleum and Energy Tina Bru said: “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.”
Source: Offshore Magazine