The Norwegian government on May 5 announced a proposal to reduce the uplift in the petroleum tax system from 7.5 per cent to 5.5 per cent.
The preliminary estimated impact for Statoil’s (NYSE:STO) operating cash flow is below NOK 0.5 billion in 2013, gradually increasing to full effect after 4-5 years. The proposed change will reduce tax deductions on the Norwegian continental shelf by NOK 38 million per every NOK 1 billion invested.
A predictable and stable fiscal framework is important to secure the attractiveness of continued investments on the Norwegian continental shelf for Statoil and other operators.
“The proposed change in the Norwegian petroleum tax reduces the attractiveness of future projects, particularly marginal fields, and raises questions regarding the predictability and stability of the fiscal framework for long-term investments on the Norwegian continental shelf,” says Torgrim Reitan, chief financial officer in Statoil.
The Government has proposed a transition rule for projects where the Ministry of Petroleum and Energy has received a plan for development and operation (PDO) or a plan for installation and operation (PIO) prior to 5 May 2013. For investments covered by the transition rule the current uplift of 7.5 per cent will apply. The transition rule applies to investments incurred up to the same year as production starts or operation of the facility starts.
The proposed change in the Norwegian petroleum tax will be included in the Revised National Budget 2013 to be announced May 7.