Equinor and other operators active in Norway may have secured a stable tax regime for the oil and gas sector through newly aired ambition to cut emissions from activities in the country.
Oil companies doing business in Norway have become increasingly concerned about future fiscal framework conditions amid calls for changes to the tax system — changes that some fear could leave half of the country’s oil and gas developments at risk of being scrapped.
However, the industry seems to have secured a stable fiscal regime after Equinor and the rest of the industry this week launched new climate ambitions to reduce absolute greenhouse gas emissions from operated offshore fields and onshore plants in Norway by 40% by 2030, 70% by 2040 and to near zero by 2050.
Equinor’s head of Norway Arne Sigve Nylund told Upstream that the company assumes that framework conditions, including the fiscal regime, will remain stable in order for the ambitions to be realised.
“We need stability in framework conditions, including CO2 [carbon dioxide] tax, inclusion in the European Union’s emissions trading system, the industry’s NOx [nitrogen oxide] fund and the fiscal system with the current uplift,” Nylund said.
He added that the Government’s reduction in tax uplift from 30% to 22% had significant impact on profitability for development projects.
Member of Parliament and Christian Conservative Party spokesperson for energy and environmental matters, Tore Storehaug, has been advocating for a similar reduction in uplift as was the case in 2013.
In addition, Storehaug has called for an assessment of the consequences of fully implementing a system that the Finance Ministry regards as neutral, a proposal that reduces uplift to 2%.
Consultancy WoodMackenzie earlier said this would make half of upcoming projects in Norway unprofitable.
Now, however, Storehaug told Upstream that he and his party will not support fiscal changes that jeopardise the new climate initiative for the industry.
“That does not mean that it should be impossible to make some changes in the framework conditions at all,” he clarified.
The other government parties — Conservatives, Progress Party and Liberal Party — have supported Equinor and the industry’s plans, with leading opposition party Labour also lending its support.
Only the leftist Socialist Party and the Green Party now oppose the plan to reduce emissions on the Norwegian continental shelf, as they are pushing to phase out oil and gas production in Norway altogether.
Nylund said it is uplifting to hear that there is support for having no change to framework conditions. “This is very reassuring. Changes like those in 2013 would be unfortunate for the industry,” he said.
The first phase of Equinor’s plan is to reduce emissions by more than 5 million tonnes per annum by 2030, representing around 10% of total current annual Norwegian greenhouse gas emissions.
Total emissions for Equinor-operated fields and plants in 2018 were around 13 million tonnes — approximately the same level as in 2005.
The ambition will cover all greenhouse gas emissions from offshore fields and onshore plants operated by Equinor in Norway, including both Scope 1 and Scope 2 emissions of CO2 and methane.
As methane emissions are very low at the Norwegian continental shelf, CO2 emissions make up the majority of emissions.