Norway: Tax relief to increase investments in oil and gas
A survey made by the Norwegian statistics bureau SSB revealed that oil and gas investment in Norway will rise more this year and decline less in 2021 than predicted a few months ago.
Oil firms, including giant Equinor, decided to go through with several projects after the Norwegian government granted tax incentives in June to encourage investment following a crash in oil prices caused by the COVID-19 pandemic.
According to the SSB, investments in Norway’s oil and gas industry are projected to be at around $20.7 billion, up from the Investments in the country’s main economic sector are now projected at $20.7 billion (184.6 billion NOK), up from the $20.1 billion forecast in May, and up from the $19.8 billion in 2019.
SSB further stated that investments will drop to $16.6 billion in 2021, which is still better than the previous prediction of $16.2 billion.
Norway’s statistics bureau stated that the PDO on Equinor’s Breidablikk project is expected to be submitted to the government this autumn. According to the SSB, this is a project that will probably have relative high investments in 2021.
Also, new PDOs for several minor development projects are expected to be submitted in 2021. This includes Eldfisk North, Tommeliten, Frosk, and Lavrans. SSB believes that, if these plans are realised, the accumulated investment costs in 2021 from these projects will increase the investments in field development compared to the present estimate.
Under the measures made by the government in Norway, projects approved by the end of 2022 are eligible for tax breaks that shield a large portion of income.
SSB did note that even though oil companies will spend more on developments, drilling new exploration wells will be declining.
“A possible explanation for the downward revised exploration estimates for 2021 might be that the tax support package which was adopted by the [ Norwegian ] Parliament in June, has in relative terms, provided a more favourable framework for the other investment categories.
“Exploration activity already has favourable conditions through the reimbursement system for exploration costs. In a long-term run, this might cause an investment move from exploration activity to the other investment categories.
“For instance, investment estimates within production drilling for 2021 have increased since the last survey. This may indicate that the oil companies are revising some of their initial plans, by moving some of their leased rigs from exploration drilling to production drilling”, SBB stated.