Domestic market overview
What is the extent of oil and gas production in your jurisdiction?
In 2015 a total of 228 million standard cubic metres oil equivalent of marketable petroleum was produced from petroleum deposits under Norwegian jurisdiction (see the Petroleum Directorate's webpage on oil equivalent: www.norskpetroleum.no/en/calculator/about-energy-calculator/).
Oil and liquids production in Norway rose in 2015 to 113 million standard cubic metres due to an increase in production regularity following a production decline between 2001 and 2013.
Gas production also increased in 2015 to 117 million standard cubic metres oil equivalent, which is a new production record. The growing demand for natural gas in Europe is an important reason for the increase. Natural gas accounted for just over 50% of total Norwegian production in 2015.
In 2015 liquid gas production was 22.1 million standard cubic metres (2.47 million standard cubic metres of condensate and 19.6 million standard cubic metres of natural gas liquids).
How does domestic energy consumption break down with respect to oil and gas, as well as imports and exports?
Norway has been a petroleum producer and net exporter since the beginning of the 1970s, with its total annual production peaking in 2004 at 264 million standard cubic metres oil equivalent.
Of crude oil and liquids produced and exported in 2015 (113 million standard cubic metres oil equivalent):
- 75 million standard cubic metres of crude oil was delivered directly to customers in Europe;
- 20 million standard cubic metres of crude oil was delivered to onshore facilities in Norway for refining and production of petroleum products, mainly for export; and
- 14.6 million standard cubic metres oil equivalent was of natural gas liquids and condensate.
Of natural gas produced in 2015 (117 million standard cubic metres oil equivalent), Norway exported 107 million standard cubic metres oil equivalent.
In the same period, Norway imported:
- 9,000 barrels (1,430 standard cubic metres) of crude oil a day; and
- 41,000 barrels (6,518 standard cubic metres) of petroleum products (mainly gasoline and motor oil) a day.
Norway has been a substantial producer of hydroelectric power for more than a century. In 2015 it produced 145 terawatt hours of power, of which 95.9 % was generated from hydropower. The high internal production and moderate electricity production costs are primary reasons for Norway's low internal consumption of natural gas.
What are the current trends and future prospects for oil and gas supply and demand in your jurisdiction, and what policies has the government adopted to address these?
The remaining petroleum reserves on the Norwegian continental shelf, as estimated by the Petroleum Directorate (in million standard cubic metres oil equivalent) can be broken down as follows:
Natural gas liquids
Total oil equivalent
Contingent resources in fields
Contingent resources in discoveries
Possible future measures for improved recovery
(Table copied from the Petroleum Directorate fact pages: www.norskpetroleum.no/en/petroleum-resources/resource-accounts/.)
The authorities have maintained a steady pace in making new acreage available for petroleum exploration and production, most recently in the deep-water areas of the Norwegian Sea and in the north and east of the Barents Sea. The implementation of rules regulating and promoting third-party access to existing time-critical infrastructure, particularly in mature areas (predominantly in the North Sea), is another measure taken to ensure the overall policy objective.
Historically, Norwegian consumers have not relied on oil and gas to secure their energy supply. There are no indications that oil and gas consumption will increase in Norway. Existing pipeline systems and other export-related infrastructure (including production of liquefied natural gas) ensure access for Norwegian oil and gas to European and other markets.
What are the primary laws and regulations governing the oil and gas industry in your jurisdiction?
The Norwegian legal system is civil law based, and the oil and gas industry is regulated primarily by legislation, the principal law being the Petroleum Act (Act 29, November 1996, No 72). The Norwegian regulatory system for petroleum exploration and production is concession, permit and approval based. All petroleum activities are subject to prior authorisation by the relevant regulatory authorities. The most important concession is the production licence.
A production licence grants exclusive rights to exploration and production of petroleum to licensees (concessionaires) within a pre-defined area. The production licences are usually granted to a group of licensees. As a condition for awards, the licensees are required to form an unincorporated joint venture under the Petroleum Agreement, which includes a joint operating agreement and an accounting agreement. The Petroleum Agreement is a non-negotiable model agreement.
Pursuant to the Petroleum Act, petroleum activities must take place within a sound health, safety and working environment framework. Environmental concerns must be taken into account throughout the industry. Mandatory provisions relating to health, safety and environmental protection are also addressed in:
- the Pollution Control Act;
- the Working Environment Act;
- the Fire and Explosion Prevention Act;
- the Electrical Supervision Act; and
- the Wage Agreements Application Act.
The more detailed provisions are set out in number of secondary regulations. Generally, these regulations stipulate functionally defined risk and performance-based requirements through descriptions of required results, levels and standards to be met. Compliance with regulatory functionality is secured through application and reference to established standards and guidelines, allowing the industry to choose among several methods, tools, procedures or solutions to achieve regulatory compliance.
The state's share of the value of the natural resources is secured through direct and indirect state participation, corporate and petroleum special tax. There is no production sharing, production bonus or royalty (abolished stepwise from 1986). Special provisions relating to taxation of petroleum activities are set out in the Petroleum Tax Act and the Carbon Dioxide Tax Act.
What government bodies are charged with regulating the oil and gas industry and what are the extent of their powers?
Roles and responsibilities are divided between governmental bodies on various levels and the commercial sector. The various authorities administer the activities through individual awards, approvals and other administrative decisions.
The most important governmental bodies and some of their key powers are as follows:
The Stortinget (Parliament) is the primary legislature in Norway passing laws, state budgets and confirming government petroleum policy through adopting formal proposals and discussing policy white papers. Approval by the Stortinget is necessary for the government to open new acreage for petroleum activities.
King in Council
The King in Council approves the award of production licences, the appointment of operators and development plans; it also submits budget proposals, projects, procedures, white papers and bills to the Stortinget. Much of the powers afforded to the King in Council through law are delegated to the Ministry of Petroleum and Energy.
Ministry of Petroleum and Energy
The Ministry of Petroleum and Energy has general responsibility for the management of the petroleum sector, including a wide range of tasks and responsibilities, such as:
- administration of licensing rounds and preparation of the award of production licences, pre-qualification of licensees and operators;
- approval of the main plans and procedures required to perform petroleum activities, including the plan for development and operation, the plan for installation and operation of facilities, the decommissioning plan and approval of production plans and production schedules;
- regulating third-party access to upstream production facilities, including stipulating tariffs for transportation of natural gas in upstream gas transportation network facilities;
- approval of direct and indirect transfer of participating interest in exclusive petroleum rights and approval of operators;
- enforcement measures pursuant to the Petroleum Act;
- oversight of the state's direct participation portfolio (the State Direct Financial Interest) managed by the wholly state-owned Petoro AS;
- managing the state's majority shareholdings in Statoil ASA; and
- oversight of the upstream gas transportation network, operated by the wholly state-owned Gassco AS.
The Petroleum Directorate has key technical expertise on petroleum resource matters and provides input to the Ministry of Petroleum and Energy on opening new acreage for petroleum activities, nomination of acreage, pre-qualification of licensees and evaluation of geo-science components of applications for award of production licences, development plans, production profiles, schedules and plans, as well as partitioning of licence areas or areas for unitisation.
The Petroleum Directorate individually administers and decides on several matters, including:
- awarding exploration licences;
- area fee collection;
- approval of plans or procedures during exploration;
- approval of drilling programmes;
- administration of the Petroleum Register;
- exploration and production data storage and filing;
- petroleum production measurement;
- carbon dioxide emission regulation;
- follow-up of licence activity through technical meetings; and
- monitoring compliance with regulatory requirements.
Ministry of Finance
The Ministry of Finance is in charge of tax policy and fiscal regulation, state budget and other tax, customs or excise matters relevant to petroleum activities. It is also responsible for the administration of the fiscal system (eg, tax assessments and the approval of tax effects of licence transfers). Tax assessments and supervision of petroleum special taxation have been delegated to the Oil Taxation Office.
Ministry of Climate and Environment
In respect of the petroleum industry, the Ministry of Climate and Environment is responsible for initiating, developing and implementing environmental and climate-related legislation, measures and actions, promoting and coordinating the government's environmental protection policies. The Environment Agency is the key authority on environmental matters, working with the Petroleum Safety Authority and the Petroleum Directorate on environmental issues related to exploration, development and production (focusing particularly on water and air emissions, waste handling, climate surveillance and the environmental status of the sea).
Ministry of Labour and Social Affairs
The Ministry of Labour and Social Affairs has the overall responsibility for the working environment and for safety and emergency preparedness in the petroleum sector. The Petroleum Safety Authority is the key subordinate agency of the Ministry of Labour and Social Affairs, responsible for technical and operational safety, working environment and emergency preparedness. The Petroleum Safety Authority regulates, inspects and exercises enforcement powers over all health, safety and environmental matters throughout the petroleum industry.
Ministry of Transport and Communications
The Ministry of Transport and Communications is the responsible authority for preparedness and response to acute sea pollution. The Coastal Administration is the subordinate agency responsible for oil spill preparedness and response, coordinating with the other relevant authorities.
Exploration and production
Who holds the rights to oil and gas reserves in your jurisdiction?
The state owns all subsea and subsoil petroleum resources within the territory, the exclusive economic zone and on the Norwegian continental shelf.
Is there a distinction between surface and subsurface rights?
The title to the petroleum passes from the state to the licensees when petroleum is extracted. No petroleum deposits have yet been discovered on the Norwegian mainland.
Regulation of conflicting rights of use of maritime space (eg, fisheries, petroleum and navigation) is regulated by the Maritime Act, the Petroleum Act and the Petroleum Regulations.
What rules and procedures govern the grant of rights for exploration and production purposes (eg, through licences, leases, concessions, service contracts, production sharing agreements)?
Petroleum activities by others than the Norwegian state may be conducted only pursuant to a licence or permit awarded by the King in Council.
Three different types of licenses are used.
The exploration licence is a non-exclusive right to conduct exploration activities (including shallow drilling) in a pre-defined area awarded for three years. The holder of an exploration licence may sell the data collected through such activities, but all information must be submitted to the Petroleum Directorate, which after a regulated period provides general public access to the data.
A production licence is an exclusive right to conduct exploration (including drilling exploration wells), development and production activities in a defined area, normally for a total period of 30 years, provided that the licensees fulfil the exploration work commitments.
The King in Council approves the award of a production licence after the concession award process conducted by the Ministry of Petroleum and Energy and the Petroleum Directorate has been completed.
In practice, a production licence is always awarded to a group of applicants. Based on applications submitted, the authorities decide the distribution of participating interests and appoint the operator (among the licensees). Group applications are allowed, but applicant groups may be split by government decision as a condition for final award. The production licence document is prepared by the ministry after call-back meetings with applicants, where the applications are reviewed and key components and conditions for the award of a licence are presented to the applicants. The applicants' preliminary acceptance of terms and conditions is required before the production licence can be formally awarded.
Licence for installation and operation of facilities
The licence for installation and operation of facilities is a right to plan, design, construct and operate a facility for petroleum activities other than activities pursuant to a production licence (eg, processing, storage or transportation of petroleum in pipelines). This separate facility licence is awarded based on a submitted plan for installation and operation of facilities, and a similar joint venture structure as for production licences is established based on the Petroleum Agreement model contract.
What criteria are considered in awarding exploration and production rights (eg, are there any restrictions on the participation of foreign investors/companies)?
The applications are assessed based on publicly available criteria and the production licence is awarded principally based on the applicant's technical qualifications, relevant experience, financial strength, geological understanding, exploration work programme proposals and proposed participating interest and operatorship. Previous experience with the applicant in Norway or elsewhere may also be included in the assessment.
There are no restrictions on the participation of foreign nationals or companies in a production licence, as long as international embargoes do not apply, but there is a longstanding policy of awarding production licences only to competent oil companies. As a result, solely financial investors are unlikely to qualify.
It is common for applicants to enter into group application arrangements related to licence rounds. Such agreements may not stipulate terms that could affect the award or the regulation of the unincorporated joint venture to be established by the licensees, and will be submitted to the Ministry of Petroleum and Energy.
Are there any special legal provisions applicable to joint ventures?
It is a condition for the award of a production licence that the licensees enter into a licence-specific unincorporated joint venture. The joint venture is not governed by Norwegian company law, but by the Petroleum Agreement, which consists of the licence-specific special provisions and the attached joint operating agreement and accounting agreement. These documents are mandatory, non-negotiable and identical in format for all production licences. The special provisions only are individualised with regard to work obligation, identification of licensees, participating interest, operator appointment and voting rules, among others. Any other agreement between the licensees or amendment to the legal instruments is subject to Ministry of Petroleum and Energy approval. The production licence requires that all contracts related to activities under a production licence be subject to Norwegian law and contract tradition.
Can exploration and production rights be transferred to third parties?
A licensee may transfer a part of or its entire undivided participating interest in any licence.
Until the mandatory work commitments have been fulfilled, a participating interest in a production licence cannot be transferred to a non-affiliated third party without consent of the management committee of the joint operating agreement. The state has pre-emptive rights on the same terms and conditions as agreed between licensees. However, it is understood that such pre-emptive rights have not been used to date.
Any transfer of a licence or participating interest in a licence for petroleum activities is subject to approval by the Ministry of Petroleum and Energy, including direct or indirect transfers of interest or control over a licensee or facility, such as transfer of shareholdings and other ownership shares which may provide decisive control.
Is hydraulic fracturing (‘fracking’) permitted in your jurisdiction?
Hydraulic fracturing may be permitted pursuant to an approved development plan, but has not been used to date. There is no petroleum activity related to petroleum deposits in mainland Norway.
Transport and storage
What is the general legal framework governing the transportation and storage of oil and gas resources in your jurisdiction?
Storage of petroleum is regulated by the Petroleum Act if part of petroleum activities within the scope of the act. Other storage-related activities are regulated by applicable industry legislation.
Transportation of petroleum in bulk by ship is regulated by general applicable maritime and industry relevant legislation and applicable flag state rules.
Transportation of oil and gas in submarine and onshore pipelines is regulated by the Petroleum Act when part of upstream offshore activities. Downstream pipeline transmission and distribution of natural gas falls outside the scope of the Petroleum Act, but is regulated by the Natural Gas Act and other applicable industry-related legislation.
Pipeline activities are regulated through the award of a licence for the installation and operation of facilities, in combination with or separate from the production licence. The right of third-party access, tariffs and other terms and conditions for use of transportation facilities are regulated by the Petroleum Act and separate regulations applicable to third-party access to facilities (eg, oil pipelines) and the tariff regulations for certain gas transportation facilities.
Almost all natural gas transportation is done through the Norwegian upstream gas pipeline network, predominantly owned by the Gassled joint venture, which consists of Norwegian continental shelf production licence holders and other long-term investors. State-owned Gassco AS is the operator of the upstream gas transportation network and of Gassled and administrates the transport capacity rights.
How is cross-border transportation of oil and gas resources regulated?
Several submarine pipelines transport petroleum from Norway to delivery points in landing terminals in continental Europe and the United Kingdom. The Norwegian petroleum transport infrastructure also includes several receiving terminals located on the territory of foreign countries. These activities and facilities are regulated by the Petroleum Act and pursuant to specific bilateral agreements between Norway and the relevant state where the terminal is located.
Are there specific provisions governing marine and ground transportation of oil and gas resources?
If part of upstream activities, transportation of oil and gas in pipelines is regulated by the Petroleum Act. Downstream pipeline transmission and distribution of petroleum falls outside the scope of the Petroleum Act and is regulated by the Natural Gas Act and other applicable industry legislation.
Transportation of petroleum in bulk by ship is regulated by general applicable maritime and relevant industry legislation and applicable flag state regulations.
Transportation of petroleum in bulk on land by other means than pipeline also falls outside the scope of the Petroleum Act and is regulated by general applicable industry legislation.
Construction and infrastructure
How are the construction and operation of pipelines, storage facilities and related infrastructure regulated?
The construction and operation of pipelines, storage and other facilities is regulated by the Petroleum Act if part of upstream offshore activities, and such activities are subject to a specific licence for installation and operation of facilities. The facilities licence is awarded for the construction and operation of processing, liquefaction, storage and pipeline facilities for petroleum purposes, based on a submitted development plan for such facility. A similar joint venture as for production licences is established, based on the model Petroleum Agreement.
What rules govern third-party access to pipelines and related infrastructure?
The right of third-party access to transportation facilities, tariffs and other terms and conditions for the use of such facilities are regulated by the Petroleum Act, the Petroleum Regulations, the Third-Party Access to Facilities Regulations and regulations for access to certain gas transportation facilities (the Tariff Regulations).
For oil pipelines, the terms and conditions for use are negotiated between the parties, but within the limits established in the Petroleum Act and the Third-Party Access to Facilities Regulations. For the upstream gas transportation network, the terms and conditions for use are standardised and the tariffs are stipulated in the Tariff Regulations. The regulations stipulate tariffs based on a capex component allowing for a reasonable return on investment and an opex component, where the principle of ‘no gain, no loss’ applies for the owner and operator. Since 2003 all gas pipelines on the Norwegian continental shelf which involve third-party users have been unitised into single joint venture Gassled, operated by the independent system operator, state-owned Gassco AS. The system ensures access to and use of the upstream gas pipeline network and related facilities for natural gas undertakings and eligible customers domiciled in a European Economic Area member state.
Trading and distribution
How are oil and gas resources traded in your jurisdiction and what (if any) regulations and procedures apply to oil and gas sales, distribution and marketing activities, both nationally and internationally?
The oil from the Norwegian continental shelf is normally sold ex-platform and either transported by pipeline (approximately 20%) to onshore terminals in Norway or the United Kingdom, or is loaded offshore on to shuttle tankers (80%) and sold globally. The natural gas is normally sold ex-platform and transported by pipeline to either the United Kingdom or the European continent to large-scale customers.
Oil and gas trading in Norway is regulated by general applicable law (eg, competition law and marketing law), and each licensee is responsible for selling its own share of oil and natural gas production from the production licence. Thus, there is no joint sale of petroleum from the production licence.
The joint operating agreement stipulates procedures relating to oil lifting and natural gas lifting and balancing. Natural gas sales are contingent on booking of transport capacity in the existing gas pipeline network.
Is oil and gas pricing regulated in your jurisdiction?
The oil and natural gas prices are not regulated as such, and producers (licensees) may negotiate prices freely in the market pursuant to general competition law. However, for tax purposes a tax reference pricing system (norm price) is established. The norm price should correspond to the price at which petroleum could have been traded between independent parties in a free market.
Occupational health and safety and labour issues
Health and safety
What health and safety regulations and procedures apply to oil and gas operations (upstream, midstream and downstream)?
The regulation in Norway related to petroleum does not include a midstream area of activities and facilities. All petroleum activities associated with subsea petroleum deposits, including utilisation of petroleum which is necessary for or an integrated part of production or transportation of petroleum, are regulated by the Petroleum Act and regarded as upstream activities. Activities outside the scope of the Petroleum Act (downstream) are regulated by general industry and other relevant legislation.
The primary laws relating to health, safety and environment in the petroleum industry are the Petroleum Act, the Working Environment Act, the Pollution Control Act and five core health, safety and environment regulations issued pursuant to these acts.
The health, safety and environment regulations all stipulate functional risk and performance-based requirements, which mean that most requirements are not listed specifically and individually with regard to a certain activity, method or equipment, but rather as a functional description, thereby giving the industry the opportunity to choose among several methods.
There are also several general health, safety and environment regulations issued pursuant to the Working Environment Act and the Fire and Explosion Protection Act that apply to the offshore petroleum activities.
The Downstream activities are, with the exception of a small refining sector and local natural gas transmission and distribution, mainly related to retail and transportation of petroleum products, which are subject to the ordinary legal regime applicable to handling hazardous substances and related facilities and activities. These activities are mainly regulated by the Working Environment Act, the Fire and Explosion Protection Act, the Electrical Supervision Act and relevant regulations issued pursuant to such legislation.
Are there any labour law provisions with specific relevance to the oil and gas industry (eg, with regard to use of native and foreign personnel)?
The Working Environment Act and related laws regulating labour relations apply to petroleum activities conducted on permanently placed facilities subject to Norwegian jurisdiction and activities beyond such areas when Norwegian jurisdiction applies pursuant to public international law.
If petroleum activities related to petroleum deposits subject to Norwegian jurisdiction are conducted on or from mobile facilities, the Working Environment Act and the relevant health, safety and environment regulations apply to the personnel involved in the petroleum activities onboard. When a moveable facility or vessel is not conducting petroleum activities, the flag state rules of the facility or vessel apply. If a moveable facility or vessel carries a Norwegian flag, the Ship Labour Act and the Ship Safety and Security Act regulate the working environment and more general labour issues.
Petroleum activity-specific regulation (partly deviating from general working environment law) is mainly stipulated in the Framework Regulations and the Activity Regulations.
Currently, there are no local content regulations or similar requirements requiring Norwegian personnel or services while conducting petroleum operations.
What is the state of collective bargaining/organised labour in your jurisdiction’s oil and gas industry?
In Norway, more than 50% of workers are organised through a variety of trade unions with collective bargaining agreements with the oil industry and ship owner associations. Trade unions are also influential in the three-party collaboration influencing all business and public sectors in Norway – including the petroleum sector – which comprises employers, employees (trade unions) and the government.
Through both general Norwegian labour law and oil and gas-specific regulations, workers are given a right to extensive contribution to and influence on their work situation – for example, representation on the board of the joint stock companies, local workers’ committees and health, safety and environment committees, and local representatives with certain powers in relation to health, safety and environment.
The Working Environment Act stipulates freedom of organisation for all employees and the Petroleum Act requires that a licensee ensure that trade union activities are permitted to take place among its own employees and the personnel of contractors and subcontractors in accordance with Norwegian practice.
The trade unions for oil and gas workers are normally subordinates to central federations of trade unions. Collective bargaining for the trade unions take place every second year with general applicable tariff agreements lasting for the same duration. Pursuant to the Wage Agreements Application Act, a wage committee may decide that a nationwide wage agreement shall apply in full or in part to all employees carrying out work of the kind specified in the agreement within a sector.
What preliminary environmental authorisations are required before commencing oil and gas-related activities?
In general, the Pollution Control Act applies to all petroleum activities. Thus, a licensee must adhere to the Pollution Control Regime and apply for relevant approvals (eg, discharges to water, air or seabed) under this regime.
The production licence may stipulate certain conditions relating to the exploration activities in the licence area (eg, stipulating a period where collecting seismic materials is prohibited due to fish spawning seasons or other conditions).
Before commencement of any exploration drilling, the licensee must obtain a drilling permit from the Petroleum Directorate and an environmental permit from the Environment Agency.
All production activities (including treatment and processing liquefaction) require a discharge permit issued by the Environment Agency.
What environmental protection requirements apply to the operation of oil and gas facilities?
Five core petroleum-specific health, safety and environment regulations are issued pursuant to the Pollution Control Act.
In addition to health, safety and working environment aspects, the regulations also cover a combination of functional and goal-oriented requirements, as well as more specific requirements on protection of the natural environment, including monitoring the natural environment (eg, effects on water column and seabed, limitations on discharges to air, sea and seabed, and waste handling).
Licensees are required to obtain a discharge permit before commencing exploration drilling, production activities and processing, which will set out pollution discharge limits and waste handling procedures.
In connection with development plans and decommissioning plans, the licensee must conduct comprehensive environmental impact assessments.
Additional environmental regulation applying to petroleum activities is covered by the Product Control Act, the Biodiversity Act and the Planning and Building Act.
What are the consequences of failure to adhere to the relevant environmental regulations and to what extent can operators be held liable for environmental damage?
The Environment Agency and other relevant petroleum sector authorities may issue orders to redress any violation of regulations and may also initiate measures to the same effect at the expense of the licensee. The agency may further stipulate day fines.
Suspension of activities and ultimate revocation of the production licence may be the consequence of breach of environmental regulations. Any liability for injury and damages resulting from such breach of environmental standards will remain on the licensee.
Both the Petroleum Act and the Pollution Control Act stipulate criminal liability for wilful or negligent violation of regulations or conditions stipulated therein.
The Petroleum Act specifically regulates a licensee's liability for pollution damages, which is defined as damage or loss caused by pollution as a consequence of effluence or discharge of petroleum from a facility.
Licensees are liable for pollution damage without regard to fault. Generally, licensees are jointly and severally liable for all obligations related to the petroleum activities, but the Petroleum Act includes specific rules regulating the claims and recourse procedure with regard to pollution damage. The Petroleum Act also includes special rules relating to compensation to Norwegian fishermen.
Taxes and royalties
What taxes (direct and indirect) and/or royalties apply to oil and gas activities in your jurisdiction (including upstream, midstream and downstream activities)?
The government’s share of the value of the natural resources is secured through direct and indirect state participation, corporate tax and petroleum special tax. There is no production sharing, production bonus or royalty applicable (abolished stepwise from 1986).
The Norwegian tax system does not ring-fence economic activity within each production licence. Companies involved in petroleum activities pay 25% company tax on net income and an additional special tax of 53% on a corrected net income (special petroleum tax base), which gives a total marginal tax rate of 78%.
In order to enable a normalised return from the special tax, an extra deduction (uplift) is applied for the calculation of the tax base on which the special tax is imposed. The uplift amounts to 30% of the investments spread over four years (7.5% per annum for four years calculated from the year that the investment was made). For investments made after May 5 2013 the uplift rate is reduced to a total of 22% (5.5% per annum for four years). Companies not in a tax position may carry forward their losses and the uplift with interest.
Exploration costs comprise all direct and indirect costs for the exploration of petroleum. For companies in a tax position, exploration costs may be deducted on a current basis. Companies not in a tax position may only on an annual basis request a refund of the tax value (ie, 78%) of their exploration costs.
No royalty has been payable since 2005.
An area fee is payable after expiry of the initial period and applies to a licence area which is not regulated by a submitted plan for development and operation.
Environmental taxes for petroleum activities are the carbon dioxide tax and the nitrogen oxide tax. Petroleum activities are also subject to a quota obligation for each metric ton of carbon dioxide emitted.
The carbon dioxide tax is paid per standard cubic metre of gas that is burned or released directly and per litre of petroleum burned. For 2016 the tax is set at Nkr1.02 per litre of petroleum or standard cubic metre of gas.
The nitrogen oxide tax for 2016 is Nkr21.17 per kilogram.
Imports and exports
What taxes and duties apply to oil and gas imports and exports?
Taxes and duties on export and import of oil and gas in Norway depend on the origin or destination of the import or export. Petroleum from Norway is mainly exported to countries which are members of the European Economic Area or European Union, where free movement of goods is the general rule for industrial goods such as petroleum, and thus no such taxes and duties apply. For import and export of petroleum to and from countries outside the European Economic Area or European Union, specific export and import taxes and duties on petroleum may apply pursuant to individual bilateral trade or tax agreements.
Norway operates a traditional value added tax (VAT) system. The sale of goods and services is normally subject to VAT at a rate of 25%. There is no VAT on goods and services supplied to vessels or facilities outside Norwegian territorial waters
As most production activity in Norway is conducted outside its territorial waters, the VAT on the sale of petroleum (commodities such as crude oil, natural gas, natural gas liquids or various condensates or potentially derivative products) to foreign buyers will in most cases not trigger VAT payments. Sale of petroleum within Norway will be subject to the ordinary rate of 25% VAT.
How is the decommissioning of oil and gas facilities regulated?
The Petroleum Act requires licensees to submit a decommissioning plan two to five years before a licence expires or is surrendered, or the use of a facility is permanently terminated. A decommissioning plan must include a part dealing with disposal and an environmental impact assessment.
The environmental impact assessment is subject to a public consultation process coordinated by the Ministry of Petroleum and Energy; the ministry then makes a final report which is basis for the decision relating to disposal by the King in Council or Parliament.
Licensees are jointly and severally liable for the disposal cost on a pro rata basis and jointly and severally liable if a partner fails to cover its share.
How are oil and gas disputes typically resolved in your jurisdiction?
As the petroleum activities are under Norwegian jurisdiction, legal disputes may be brought before Norwegian courts.
With regard to disputes arising in connection with a joint operating agreement, the agreement stipulates that, unless the parties agree to take the dispute to the ordinary courts of law, any such dispute will be settled by arbitration in Norway under Norwegian law. The Arbitration Act (May 14 2004, No 25) will apply unless otherwise agreed.
In practice, most disputes between the licensees and between oil companies and suppliers are resolved through arbitration.
What regulations and procedures are in place to combat bribery, fraud, collusion and other dishonest practices in the oil and gas sector in your jurisdiction?
There is no petroleum sector-specific anti-corruption regulation in Norway. Corrupt practice is prohibited and punishable by fines and imprisonment in accordance with the Penal Code.
The Penal Code applies to anyone that is registered in Norway and carries a penalty of up to 10 years' imprisonment for gross corruption, even if the act is committed abroad. A company can be held criminally liable for corruption offences committed by individuals acting on its behalf. The code also criminalises fraud, extortion, breach of trust and money laundering.
The Money Laundering Act and applicable regulations are in accordance with the EU Second Money Laundering Directive 2001.
The Labour Act guarantees whistle blower protection.
The Political Parties Act provides the legal basis for monitoring political financing.
The Competition Act and the European Economic Area Competition Act 2004 include a prohibition against cartels and other concerted practices that have as their object or effect the prevention, restriction or distortion of competition. The legislation is primarily enforced by the Competition Authority.
Norway was accepted as a full member of the Extractive Industries Transparency Initiative (EITI) in March 2011, and is thus far the only Organisation for Economic Cooperation and Development country that has implemented the EITI criteria and been accepted as compliant.
Law stated date
Correct as of
Please state the date of which the law stated here is accurate.
November 8 2016.