Norway Should Give Incentives for Tail-end Oil Production -Exxon
Norway should give companies fiscal incentives to continue production from maturing oilfields in the North Sea as investment falls, Exxon Mobil (XOM) Production Vice President John Chaplin said on Wednesday.
Unlike many other oil and gas producers, Norway, Western Europe's top oil producer, hands out licences for free and subsidises exploration and development costs, before imposing a 78 percent tax on production.
The change in the taxation system in 2004 led to an exploration boom which resulted in finds such as the giant Johan Sverdrup field in 2010.
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.
"I think so," Chaplin told Reuters, when asked if Norway should provide tax incentives for the production phase.
"Most countries have come to that conclusion ... The UK has recognised that they need to have investments for the tail-end production," he said on the sidelines of the International Petroleum Tax conference, where other speakers raised the issue.
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.
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 government is committed to maintain predictability ... stability and no changes is better than negative changes," he said, adding that companies should cut costs instead.
Exxon's Chaplin, however, said companies might not have time to wait for the oil price rebound and might look for new opportunities elsewhere, in places such as Iran or Africa.
"When you see 78 percent tax take, you wonder if you should go to Mozambique of somewhere else," he said.
The U.S. oil major Exxon Mobil expected production from Kazakhstan's vast Kashagan oil field, the world's biggest oil find in decades, to resume at the end of 2016, Chaplin said.
The oil field is being developed by a consortium which includes KazMunaiGas, Exxon Mobil, Eni, Royal Dutch Shell (RYDAF), Total, China's CNPC and Japan's Inpex.
It began production in September 2013 but output was halted a few weeks later after leaks were detected in its pipes.
Chaplin said the European refining sector remained a bright spot and the company was committed to continue investing in its refineries.
"We have a positive view of Europe, but it's a challenging environment ... The best run refineries will always do well," Chaplin said.
(By Nerijus Adomaitis)
