As a result of falling investment funding, Norway should be providing fiscal incentives to companies to continue producing at declining oil fields in the North Sea, according to ExxonMobil Production Vice President John Chaplin.
In other words, the Exxon Mobil exec is requesting that the government of Norway provide oil firms (very wealthy ones) with tax incentives for tail-end production in the rapidly depleting North Sea oil fields, because investment funding is drying up.
To explain that somewhat, in contrast to many others, Norway subsidizes oil and gas exploration development costs already, and simply makes its money on its imposition of a high 78% production tax rate once things are up and running. So, the ExxonMobil exec’s request isn’t ridiculous, as it may seem on the surface, as it would more or less simply be an expansion of what is already going on.
The comments, made in an interview with Reuters at the International Petroleum Tax conference, went: “I think so. Most countries have come to that conclusion. … The UK has recognized that they need to have investments for the tail-end production.”
Chaplin also noted: “When you see 78% tax take, you wonder if you should go to Mozambique of somewhere else.”
He then added to that, stating that waiting for the price of oil to rise again may not be something that many companies are willing to do, and that they “might look for new opportunities elsewhere, in places such as Iran or Africa.”
Perhaps, but oil certainly isn’t an unlimited resource, and affordably extracted oil most definitely isn’t. Considering that many large oil companies already do have quite a presence on the African continent, as much as it makes sense to, it’s not a very meaningful threat.
Reuters provides more: “But with oil prices having more than halved since their June 2014 peak, companies have slashed investment and axed more than 25,000 jobs in Norway’s oil sector, and more cuts are expected. … However, there was little appetite from the Norwegian government to lower taxes for oil companies as it may have to dip deeper into its sovereign wealth fund to plug its structural budget deficit.”
Continuing: “Nikolai Astrup, energy spokesman for the ruling Conservative Party, told the conference that the government was committed to keeping the oil tax regime unchanged, while some politicians were calling for higher taxes on carbon emissions.”
The words used by Astrup were: “The government is committed to maintain predictability … stability and no changes is better than negative changes.”
Astrup also commented that the companies should be focusing on cutting costs rather than looking for further tax breaks.
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