Statoil cites tax issues in project delay

Norwegian oil company Statoil has announced that it is delaying an investment decision for its Johan Castberg oil field in the Barents Sea because of a combination of uncertainty in the resource estimates for the field and proposed changes to Norwegian petroleum taxes. Statoil says that it has been continuing to assess the project, and that the tax changes are compounding the overall project uncertainty. The field, previously called Skrugard, lies about 240 kilometers northwest of Hammerfest and is thought to hold 400 million to 600 million barrels of oil.

According to a report in the Wall Street Journal, in early May the Norwegian government announced an increase in its petroleum tax by reducing the amount of field development cost that companies can write off against their tax liabilities. Oystein Michelsen, Statoil’s executive vice president for development and production in Norway, said in a Statoil news release that the tax changes have made it necessary to review the Johan Castberg project.

“The updated project estimates and the new uncertainty in the tax framework has made it necessary to consider what consequences this may have for the development concept,” Michelsen said.

Rather than gathering oil production taxes and royalties, Norway gains revenues from oil fields by maintaining a mandatory government working interest in all fields, with the government investing in the fields and taking its share of field revenues. However, the government assesses very high rates of corporate income tax on oil companies, albeit with tax deductions for expenses and investments.

—Alan Bailey