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Norway’s Oil Industry Questions $10 Billion Tax Plan

A $10-billion tax deferral plan proposed by the Norwegian government has prompted two oil industry executives to voice concern that it would do nothing to support the sustainability of the oil industry in Europe’s largest producer, Bloomberg reports.

The chief executives of Equinor and Aker ASA said that while the plan will improve oil companies’ liquidity, it does nothing to address risks related to production capacity and the startup of new projects.

“Changes to the proposal are required in order to avoid significant and permanent reduction in capacity and competency for the Norwegian supplier industry,” said Aker ASA’s chief executive Oyvind Eriksen.

Equinor’s CEO, Eldar Saetre, said the government’s tax deferral would force the company to delay the start of several new projects.

The Norwegian government proposed the tax deferral plan at the end of last month, hoping to prevent a slump in investments. It boils down to letting companies write off investments more quickly, Reuters reported at the time, allowing them to delay paying taxes. It would also make their taxable income lower, allowing them to take more substantial deductions on new investments.

“Even if the government pursues a policy of becoming less dependent on oil, it’s important to prevent the current crisis from making the decline so rapid that we lose key competence that will help the transition,” Prime Minister Erna Solberg said at the time.

The proposed measures may be positive for exclusively Norway-focused companies, but Equinor also has operations outside the country, which would limit the benefits of the tax deferrals, a local energy analyst told Reuters in April.

Norway agreed last month to cut its oil production by 250,000 bpd in June and then maintain 134,000-bpd lower production until the end of the year.

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The baseline for the cuts will be 1.86 million bpd, which, according to the Norwegian Petroleum Directorate, is substantially higher than the average production rate for March, which was 1.68 million bpd. The difference means that the actual June cut will be about 70,000 bpd, based on March levels, according to Oilprice calculations.  

By Irina Slav for Oilprice.com

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