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Not good enough

It is positive that the government is responding to the petroleum sector, but the proposals presented today have important weaknesses which mean that the industry will receive limited benefit from the temporary adjustments to the tax regime.

The industry has proposed temporary measures to safeguard ongoing activities and to stimulate investment in new projects at a wholly extraordinary time. This proposal would both enhance liquidity in the companies and provide the necessary improvement in profitability for new projects.

While the government’s proposal for direct depreciation might strengthen liquidity for the companies, the effect of reducing uplift undermines the proposal’s objective – namely to create a profitable basis for new projects and activities,” says Knut Thorvaldsen, acting director general of the Norwegian Oil and Gas Association.

“The proposed reduction in uplift will significantly weaken the profitability of new projects compared with the industry’s own proposal and, viewed in isolation, make it significantly more difficult to maintain the level of activity in today’s conditions.”

In addition, the uplift proposal will increase the industry’s overall tax burden and will therefore not be neutral in terms of proceeds. That is very serious and surprising in the present circumstances. The government has also suggested a time frame for the proposal which would exclude several substantial projects. This means that these could not be continued or initiated in today’s conditions.

Together with the companies, Norwegian Oil and Gas must now take a closer look at the effects of the government’s proposal. The association’s original plan had a substantially greater impact on activity, jobs and value creation. Norwegian Oil and Gas hopes that the government and the Storting (parliament) will now listen to the industry’s assessments, so that measures are adopted which are as effective as possible for the whole industry.

Further information from

Tommy Hansen, director of communications, Norwegian Oil and Gas Association, mobile +47 909 58 450