Norwegian offshore wind projects tied directly to oil and gas installations will come under the nation's generous petroleum tax scheme, according to Norway’s Minister of Petroleum & Energy Tina Bru, but it remains unclear whether large wind power parks will benefit from the arrangement.
The country’s oil and gas industry is anxiously anticipating Friday's Energy White Paper with one area of particular interest being what the government intends to do to secure large investments in offshore wind projects.
The Norwegian Oil and Gas Association (Norog) has proposed that oil and gas producers be allowed to sign long-term power purchase agreements with companies delivering wind power from the Norwegian shelf, which would come under the petroleum tax regime. This temporary relief measure would effectively have the government cover up to 90% of the cost of oil and gas developments sanctioned before the end of next year.
In an interview with Upstream, Norway’s minister of petroleum and energy Tina Bru said the government has not ruled out including suppliers of offshore power in Norway’s generous petroleum tax scheme, even though these wind power companies pay only 22% corporate tax, compared to the 78% that oil and gas producers pay.
“Offshore wind can be used directly as a power source for offshore oil and gas fields, as in Hywind Tampen,” Bru said, referring to Equinor’s floating wind power project, which is directly tied to the Snorre and Gullfaks oilfields, and is therefore subject to petroleum taxation.
However, Norog has called for petroleum tax to apply to offshore wind developments that are also linked to the power grid on the Norwegian mainland.
Asked by Upstream if the government will also allow for these developments, Bru did not want to divulge details.
“Which tax scheme these projects are under will be decided by the Norwegian Petroleum Tax Administration,” she said.
One centrally placed industry source told Upstream this might mean the government would not allow large floating offshore wind parks to come under the petroleum tax scheme.
“These projects are too large to go directly to specific oil and gas installations. They need to be linked to the power grid onshore to balance the power supply, which today’s petroleum law does not allow for,” the source said.
When Upstream in April confronted the Petroleum Tax Administration about this issue, it redirected the questions to the Ministry of Finance, which itself did not address the specific question, instead sending an assessment it had performed eight years ago.
This 2013 assessment concluded that, even if some of the power produced by a specific wind power facility goes to an offshore installation, all production from the wind power facility would need to be used at such installations for it to benefit from the petroleum tax scheme.
Norog would not speculate in what Bru’s comments meant.
“We are eagerly awaiting details about this in Friday’s white paper,” said Roger Pedersen, the assocation's special advisor for trade and industry policy.
He explained that industry's proposal is based on large floating offshore wind parks in the Utsira Nord area tied both to oil and gas installations and the onshore power grid.
Pedersen added that Bru on Tuesday had made several positive announcements at an offshore wind conference in Norway.
“It seems like the government wants the development of both bottom-fixed wind in Sorlige Nordsjo II and three floating wind power areas in Utsira Nord," he said.
The government aims to announce details of the auction for the Sorlige Nordsjo II wind developments in the first quarter of 2022.
“The government will award two or three project areas in Sorlige Nordsjo II for development in a two-stage process. The first step is a qualification process. The second step will be an auction where the qualified bidders can participate,” Bru told Upstream.
The proposed bottom-fixed offshore wind projects in Sorlige Nordsjo II will not need state aid, she added.
In the Utsira North area, which is only suitable for floating wind projects, Bru believes the best way forward is to develop projects through a licensing process, with potential funding through Norway’s technology support programme, Enova.
“We are proposing to award at least three areas for up to 500 megawatts each, at Utsira North," said Bru.
"The award of acreage will be based on qualitative criteria and take place as soon as it has the framework in place. We are aiming for the process to start by the end of this year.”
With technology rapidly maturing and costs coming down, it is difficult to predict how much support a 200 to 500 MW project in Utsira Nord will need, the minister said.
“Therefore, we believe the best way forward is to mature projects through the licensing process,” she said.
The government has set a maximum combined capacity of 4.5 gigawatts for these offshore wind development projects - 3 GW at Sorlige Nordsjo II and 1.5 GW at Utsira Nord.