How Norway is responding to oil market challenges
The Norwegian government announced oil production cuts on Wednesday 29 April; it followed-up with proposed changes to its fiscal terms the following day.
The moves are a clear indication that the government is aligned with global efforts to stabilise oil markets by cutting supply. At the same time, it is trying to support domestic oil and gas industries that have been hit by a 65% slump in oil prices since the turn of the year.
Are you looking to understand the Norwegian response to the oil market crisis? Listen to this webinar with Norway upstream experts Neivan Boroujerdi, principal analyst, Greg Roddick, petroleum economist, and Nick Williams, expert user of Wood Mackenzie Lens Upstream. You'll find out whether the proposed production cuts and fiscal stimulus can protect Norway’s upstream sector and safeguard the project pipeline.
Fill in the form on this page to access the webinar recording.
The key talking points of this webinar include:
Production cuts: 250 kb/d in June and 134 kb/d over the second half of 2020. Delays to projects that were expected to start-up in 2020 will provide additional reductions. The government expects total forecast production to be approximately 300 kb/d lower by the end of this year versus initial company estimates.
Proposed tax changes: temporary changes include the immediate capital allowance and uplift for Special Tax only. The uplift rate will be reduced from 20.8% to 10%. Only approved investment up until 2024 will qualify.
Our take: the government's measures underscore the importance of the oil and gas industry to Norway’s economy. The last time Norway imposed production restrictions was back in 2002, following the turmoil of 9/11. Back then companies took the opportunity to carry out non-essential maintenance and turnarounds. But at a time of coronavirus related restrictions and a dramatic fall in revenues, these cuts will add to what is a torrid time for producers.
The rationale for tax changes has grown stronger as discretionary and committed investment is slashed, and the risk of bankruptcies and job losses increases. The government's proposal will improve cash flow through the accelerated capital allowance and help protect already sanctioned investment. But it is unlikely to encourage new project sanctions in a low oil price environment.
Fill in the form on this page to listen to the webinar. Get answers to the following questions:
- What are the key differences between current terms, industry proposals and government proposals?
- Which companies are likely to feel the effect of production cuts?
- Will government proposals go far enough to secure FIDs?
- And more