The world needs more energy
The global energy situation has recently been the subject of much debate. The greatest economic crisis since the Second World War broke out in several areas in 2009. Reduced economic activity resulted in a steep drop in oil prices. After the large fluctuations in the oil market, oil prices stabilized in 2010, and Brent Blend was throughout the year trading at between 70 and 90 dollars per barrel. The average for North Sea oil in 2010 was $ 80.3 per barrel, which is up 28.5 percent from the year before. During spring 2011 the oil price increased and in the middle of March it is over 110 dollars a barrel.

The environment
The IEA’s scenarios for stabilizing carbon emissions are based on a daily production level of eleven million more barrels than in 2008. This means that the IEA assumes a significantly higher oil production than today to meet demand. More efficient energy use will account for much more than half of the contribution to stabilize carbon emissions by 2030.

The Norwegian framework
The main laws governing petroleum activities on the Norwegian shelf, is the Petroleum Act of 29 November 1996 and the Petroleum Taxation Act of 13 June 1975.

Tax and Development
The tax system on the Norwegian continental shelf reflects the fact that the state is the owner of the subsea resources and the oil companies’ value creation of an industrial nature. The tax system is balanced in that projects that are profitable before tax will also be profitable after tax. However, the tax system has a negative effect on the companies’ financing costs in that the companies carry 100 percent of the development costs, while the state keeps 78 percent of the revenues. This is currently compensated for by the companies being entitled to depreciate 130 percent of the invested amount, a so-called ‘uplift’, which means that the net present value is as if the state had invested together with the companies. This system works well for companies with major petroleum revenues, but less so for smaller, independent companies that need to obtain external financing for their projects.

Government and Development
Once commercially recoverable reserves have been discovered, the licensees must prepare and gain the authorities’ approval of a Plan for development and operation (PDO) before the development can start. An important part of the PDO work is to study potential positive and negative consequences of a development.

Licensing Round
License rounds are very important to Det norske and it is the most important way of gaining access to new areas. Since 1965, the authorities have completed 21 license rounds in new areas. In later years, such rounds have been conducted every other year, and most of the awarded areas are in the Norwegian Sea. In addition, the Norwegian authorities introduced rounds of awards in pre-defined areas (APA) in 2003. These license rounds include new call for applications for returned areas in mature areas of the continental shelf. APA rounds have been carried out annually since 2003. So far, the authorities have signaled that the APA scheme will be continued.

Det norske and the Tax System
The taxation of oil companies in Norway is based on the rules that apply to ordinary company taxation. Due to the extraordinary profitability involved in the production of petroleum, this type of activity is also subject to additional special taxation. The ordinary company tax rate is 28 percent. The special tax rate is 50 percent, making the total marginal tax rate 78 percent.