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2018-03-28 10:50:00

NORWAY'S OIL THREAT

NORWAY'S OIL THREAT

BLOOMBERG - Norway's oil industry has one more thing to worry about.

After an unprecedented lawsuit against Arctic drilling, environmentalists have launched a new legal battle to challenge a tax incentive that's been a cornerstone of the country's policy to stimulate oil exploration.

The move comes at a bad time for Norway, which needs to step up up the search for new resources if it wants to avoid a sharp output decline from the middle of next decade. It adds to existing headwinds for the country's biggest industry, which has emerged stronger from a bruising slump but is facing an intensifying debate over its sustainability.

At stake is a tax mechanism that allows unprofitable oil companies to claim 78 percent of exploration costs as a cash refund, instead of deducting the expenses over time. The government has paid out 109 billion kroner ($14 billion) since 2005 to explorers such as Lundin Petroleum AB and Repsol SA. It helped attract more companies to Norway, nearly doubling the pace of exploration and leading to key discoveries such as the multi-billion-barrel Johan Sverdrup field.

Environmental group Bellona last year filed a complaint to the EFTA Surveillance Authority, a watchdog that makes sure Norway complies with European Union rules. Should ESA decide the refund is illegal state aid, oil companies would need to return some of the cash and Norway dismantle the program.

"It would be serious," Petroleum and Energy Minister Terje Soviknes said in an interview. "We need more exploration activity."

Climate activists are increasingly turning to the law to fight the oil industry. Greenpeace has also sued Norway -- unsuccessfully so far -- to stop licenses in the Barents Sea. Opponents say the exploration refund encourages the search for oil the world can't afford to burn.

ESA will by the end of the year decide on whether to formally investigate, which could take 12 to 18 months, Gjermund Mathisen, the director of competition and state aid, said in an email. Norway could appeal in the case of a loss. It has rebuffed claims that the program constitutes illegal aid, most recently in a Feb. 9 letter to ESA.

Erling Hjelmeng, a law professor at the University of Oslo, puts the probability of Norway losing at more than 50 percent. "This is pretty open," he said in a phone interview.

But the financial impact would be limited since the amount companies would be forced to return would likely be much lower than what has been paid out since 2005, according to Hjelmeng and Oyvind Olimstad, a partner at law firm Selmer Advokatfirma DA.

That's because the financial advantage is limited to the value of getting an immediate refund rather than a later tax deduction, they said. Many of the companies are also now paying taxes, making them eligible for deductions that would even out the slate.

'Great Loss'
But a loss would hurt exploration.

Activity would "undoubtedly" drop, said Graham Stewart, chief executive officer of Faroe Petroleum Plc, a London-listed company that's recouped 2.8 billion kroner since 2006. Faroe is "all but immune" because it will soon be in a tax-paying position, but it would make Norway less attractive to new entrants and could make some companies leave, he said.

"It would be a great loss," Stewart said in an interview. "It's worked really well for Norway."

Norway would then need to look at other measures to compensate, Soviknes said.

One example of how the tax rule has served Norway is the success of Lundin. Backed by the refund, the Swedish company was able to test new exploration theories and eventually in 2010 discovered Sverdrup, Norway's biggest oil find in decades.

Since 2005, Lundin has received about 6.5 billion kroner in refunds. But it's also paid more than 25 billion kroner in taxes -- and expects to pay 200 billion kroner more by 2040.

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Earlier:

 NORWAY'S OIL PRODUCTION 1.944 MBD
2018, March, 23, 08:05:00

NORWAY'S OIL PRODUCTION 1.944 MBD

NPD - Preliminary production figures for February 2018 show an average daily production of 1 944 000 barrels of oil, NGL and condensate, which is a decrease of 83 000 barrels per day compared to January.

 

 NORWAY'S PETROLEUM RESOURCES: 15.6 BLN M3
2018, March, 4, 11:10:00

NORWAY'S PETROLEUM RESOURCES: 15.6 BLN M3

NPD - The Norwegian Petroleum Directorate’s (NPD’s) estimate for total proven and unproven petroleum resources on the Norwegian continental shelf is about 15.6 billion standard cubic metres of oil equivalents.

 

 NORWAY DEFENDS OIL
2018, February, 12, 07:10:00

NORWAY DEFENDS OIL

REUTERS - “The Ministry maintains that the Norwegian rules on reimbursement of exploration costs and interest on carry forward of losses ... do not constitute state aid under Article 61 of the EEA Agreement, and are therefore in compliance with the EEA (European Economic Area) law,” the ministry said in a letter.

 

 NORWAY DIVESTS OIL
2018, February, 7, 07:45:00

NORWAY DIVESTS OIL

BLOOMBERG - Norway’s $1.1 trillion wealth fund shocked the world last year when it announced a plan to divest all its oil and gas stocks, worth $35 billion at the time.

 

 NORWAY'S OIL BOOM
2018, January, 31, 10:40:00

NORWAY'S OIL BOOM

BLOOMBERG - With crude back at $70 a barrel, and a petroleum industry that cut costs to the bone after the oil crash, the stage is now set for another boom. But the good times could hamper Prime Minister Erna Solberg’s main aim of moving the economy away from a reliance on oil. As optimism now returns to the economy, signs of real progress on that project are few.

 

 NORWAY'S OIL PROBLEMS
2018, January, 3, 15:35:00

NORWAY'S OIL PROBLEMS

BLOOMBERG - Norway’s oil production has been halved since a 2000 peak. While natural-gas output has surged, total production is forecast to fall again in the middle of the next decade. A flurry of investment decisions at the end of last year hides a painful truth: after Statoil’s $6 billion Johan Castberg oil field starts production in the Barents in 2022, the project pipeline is scant.

 

 U.S. WANT NORWAY
2017, August, 31, 12:10:00

U.S. WANT NORWAY

Norway’s $970-billion sovereign wealth fund, the world’s largest, should allocate a bigger share of its investments to renewable energy to boost returns, a U.S. energy policy think-tank said

Tags: NORWAY, OIL
NORWAY'S OIL THREAT September, 21, 11:00:00

OIL PRICE: NEAR $79 STILL

NORWAY'S OIL THREAT September, 21, 10:55:00

RUSSIA'S OIL PRODUCTION: 11.3 MBD

NORWAY'S OIL THREAT September, 21, 10:45:00

UNEXPECTED OIL PRICES

NORWAY'S OIL THREAT September, 21, 10:40:00

OIL MARKET UNCERTAINTY

NORWAY'S OIL THREAT September, 21, 10:35:00

OPEC-NON-OPEC DECISIONS

NORWAY'S OIL THREAT September, 21, 10:30:00

U.S. CAPITAL EXPENDITURES UP

All Publications »

Chronicle:

NORWAY'S OIL THREAT
2018, September, 21, 10:25:00

U.S. ENERGY CASH: $119 BLN

U.S. EIA - Energy companies’ free cash flow—the difference between cash from operations and capital expenditure—was $119 billion for the four quarters ending June 30, 2018, the largest four-quarter sum during 2013–18 Companies reduced debt for seven consecutive quarters, contributing to the lowest long-term debt-to-equity ratio since third-quarter 2014

NORWAY'S OIL THREAT
2018, September, 21, 10:20:00

WORLD OIL DEMAND: 100.23 MBD

OPEC - Total oil demand for 2018 is now estimated at 98.82 mb/d. In 2019, world oil demand growth is forecast to rise by 1.41 mb/d. Total world oil demand in 2019 is now projected to surpass 100 mb/d for the first time and reach 100.23 mb/d.

NORWAY'S OIL THREAT
2018, September, 21, 10:15:00

IRAQ'S OIL: NO RECORD

ARAB NEWS - Oil exports from southern Iraq are heading for a record high this month, two industry sources said, adding to signs that OPEC’s second-largest producer is following through on a deal to raise supply and local unrest is not affecting shipments.

NORWAY'S OIL THREAT
2018, September, 21, 10:10:00

NATURAL GAS EXPORT UP

PLATTS - The International Energy Agency expects the US to account for 75% of the global growth in natural gas exports over the next five years, a bullish outlook for LNG developers facing challenges at home getting projects off the ground and abroad with tariffs affecting trade flows.

All Publications »