REVAMP URGED FOR NORWAY'S OFFSHORE REGIME

The Norwegian government has come under renewed pressure from offshore operators to fine tune its licensing procedures and tax regime.

The need for change was emphasized at the Advanced Petroleum Conference in Stavanger attended by senior personnel from companies active in the Norwegian and British sectors of the North Sea.

Companies have had some success in the tax front, winning changes in proposals from Norway's Ministry of Finance for offshore tax reform. The changes were required to offset a general reduction in the corporate tax to 28% from 50.8%.

The revised proposals still require debate by Storting (parliament). Industry will not know until February or March 1992 whether the proposed tax package will remain intact after parliamentary scrutiny.

Norsk Shell has told the government that in view of uncertainty about taxes it will not take part in the normal industry-government discussions about what acreage should be included in the 14th licensing round to be announced next year. This action does not bar Shell from participating in the licensing round when it gets under way.

Shell has said if the tax package is not changed sharply in its passage through Storting it is unlikely to bid for new licenses.

SHELL CAMPAIGN

Shell pursued its campaign for offshore changes at the Stavanger conference with a call by Hans Meijer, exploration and production director, for a review of the licensing system and fiscal regime. The goal is to allow the industry to operate in a more efficient manner with full risk coverage.

Meijer told the conference industry should aim for better returns on field development because current profits do not allow enough risk coverage.

He called for the Norwegian government to allow group applications for licenses.

In Norway, companies are required to bid individually for acreage. Operators are designated and groups put together by the authorities. Meijer said these "forced marriages" result in partners with different tax positions and differing views about the future for the block.

At the same time, Meijer said, field unit groups should be made smaller by awarding whole structures to one license group. And if a discovery extended into open acreage an extension of the existing license should be allowed.

An initial 4 year seismic acquisition and evaluation period should be granted, after which the license must be dropped or a well drilled. This would be followed by an optional 6 year period to explore the license area fully, after which all areas without proved hydrocarbons would have to be relinquished. There would then be a 30 year development and production period.

CO2 TAX

Eivind Reiten, former Norwegian oil minister and now a senior vice-president of Norsk Hydro AS, criticized Norway's tax on CO2 emissions by production platforms. He called the tax an example of how environmental charges should not be introduced.

Reiten said the CO2 tax imposed at the beginning of this year was equal to a 10% increase in operating costs, calculations by the NPD showed.

The government insisted the charge was needed to induce operators to start limiting CO2 emissions. But Reiten said nothing had been achieved through the charge that could not have been achieved by giving companies 1-2 years to implement control measures.

The charge will rise by more than 30% in 1992. Reiten said this underpinned the impression that the industry is up against an added tax rather than an incentive to increase efforts to protect the environment.

INDEPENDENTS' ROLE

Peter Kingston, managing director, technical, Enterprise Oil plc, said independents will hold the key to the next phase of reserve development in the U.K. North Sea. He said he would not be surprised to see some of the major companies that had been among the first to acquire acreage in the region lessen their commitment in favor of "elephant hunting" elsewhere.

In the recent 12th U.K. licensing round independents accounted for 25% of the acreage granted.

They have proved adept and eager dealmakers, Kingston said. They have been able to combine mobility, innovative thinking, and determination with exploration expertise to chase prospects which other, more conservative companies might have overlooked.

In other presentations John Browne, chief executive of BP Exploration, said that his company has started a program to raise profits by 50 cents/bbl of production by yearend 1993.

It has achieved a 20 cents/bbl increase this year with hundreds of initiatives at working levels throughout the company.

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