Norway plans tax breaks for remote Arctic oilfields - Taipei Times
Thu, Sep 07, 2017 - Page 7 News List

Norway plans tax breaks for remote Arctic oilfields

Reuters, OSLO

The Norwegian government plans to make taxpayers rather than oil companies pay special UN fees for any offshore production from remote Arctic regions, according to letters sent to oil firms and seen by Reuters.

The plan could serve as an example for other nations looking to fund exploration of the seabed ever further from land.

It was criticized by opposition parties that want tighter limits on exploration in the fragile Arctic environment, days before an election in which the future of Norway’s big offshore oil and gas sector is a major issue.

Opinion polls show a neck-and-neck race between Norwegian Prime Minister Erna Solberg of the Conservative Party and Labour leader Jonas Gahr Stoere.

“There is too little risk on the companies and too much risk on the people of Norway,” said Ola Elvestuen, the head of parliament’s Energy and Environment Committee and a member of the Liberal Party.

“Neither me nor the committee were informed about this,” he said of the plans, outlined in letters provided to reporters by the Norwegian Oil and Energy Ministry, for implementing a dormant provision of the 1982 UN Convention on the Law of the Sea.

Under Article 82 of the treaty, rich nations are due to pay up to 7 percent a year of the value of any production — of oil, gas or other minerals — from their continental shelves more than 200 nautical miles (370 km) from land to a fund to help developing nations.

The money would be channeled to poor nations via the UN International Seabed Authority in Jamaica. The mechanism is untested as there is no production so far offshore.

The ministry included a warning about Article 82 when it offered parts of the Arctic Barents Sea, more than 200 nautical miles from land, for exploration in the latest licensing round awarded last year.

“The licensees could be required to cover certain costs in this connection,” it wrote in the letters to oil companies. “Any such cost will be deductible in the calculation of the petroleum tax.”

The ministry viewed the deductions as matching Norwegian petroleum policy, which includes a principle that “an investment project that is profitable before tax is also profitable after tax,” an official source said.

Last month, Statoil and partners Chevron, ConocoPhillips, Lundin Petroleum and Petoro drilled the first well in the Arctic Korpfjell prospect, 410km from land.

They found only small, non-commercial quantities of natural gas, but Statoil plans more drilling in the area next year.

The government has also offered three additional blocks behind the 200 nautical miles threshold in upcoming licensing rounds, with awards expected next year.

Of the 166 nations that have ratified the Law of the Sea, Norway has apparently gone furthest in outlining how it would apply Article 82, legal experts said.

The US, which has not signed up, tells bidders for oil and gas leases far offshore in the Gulf of Mexico that they might be at risk of extra charges if Washington were to join.

“Norway and the United States are the only two countries that have spent any time talking about Article 82,” said Wylie Spicer, a Canadian legal expert who has written reviews of Article 82 for the UN.

John Norton Moore, a law professor at the University of Virginia who helped draft Article 82, said Oslo was trying to balance the interests of its citizens, oil companies and developing nations.

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