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Law360 (April 30, 2020, 8:21 PM EDT) -- The Norwegian government will offer a "major package" of tax breaks creating up to 100 billion krone ($9.7 billion) of investments for its oil and gas industries in response to the COVID-19 pandemic, the prime minister announced Thursday.
Measures include refunding tax losses for 2020 and 2021 and expanding deductions for investments in what Prime Minister Erna Solberg said is Norway's largest and most important industry. A "green restructuring package" of alternative energy measures is also planned, she said.
"The government is seeking to make the Norwegian economy less dependent on oil, but it is vital to ensure that the crisis we are now experiencing does not result in such a sudden and deep decline that we lose valuable expertise that we need for the transformation of Norway's economy," Solberg said in a statement.
The global economy is slowing as a result of the pandemic, slashing demand and energy prices, Solberg said. Firms are delaying investments and maintenance in the drilling operations, she said.
The government will allow oil and gas companies to deduct investments made in 2020 and 2021 from their special tax base, starting immediately, the prime minister said. The special tax base is a 56% tax on profits in addition to the ordinary business rate of 22%, according to the Norwegian government.
The government will also allow companies to change their deduction for uplift from the special tax base. Uplift is a deduction for the cost of investments in addition to depreciation. It currently is equal to 20.8% of an investment, spread over four years (5.2% per year). Under the tax program, the new deduction for uplift will be 10% of the investment, taken in the first year.
"We are still expecting petroleum investments to fall in the years ahead, but this proposal will mean that the decline is not so steep," Norway's finance minister, Jan Tore Sanner, said in a statement. "The country will be able to retain jobs and valuable expertise, which will curb the decline but not prevent restructuring."
The green program will include additional funding for Enova, a state-owned company that helps businesses purchase green technologies, the statement said. It will also boost funding for research and development of alternative energy sources.
There are 87 operating oil and gas fields in the Barents, Norwegian and North seas, according to the Norwegian Ministry of Petroleum and Energy. Another 13 fields were planned for development, it said.
The tax measures will be rolled out on May 12 in a bill to the Storting, the nation's parliament, while more details on the green program will be unveiled at the end of May, Solberg said.
The Norwegian prime minister's office did not respond to requests for comment.
--Editing by Neil Cohen.
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