The Norwegian government provided 25.5 billion Norwegian kroner (US$4 billion) in subsidies for upstream oil and gas activities in 2009, according to a new report.

The report, published by the International Institute for Sustainable Development’s Global Subsidies Initiative, and authored by Econ Pöyry, provides the first detailed accounting of oil and gas subsidies in Norway.

The report uses the internationally recognized definition of a “subsidy” established by the World Trade Organization (WTO) as a starting point for identifying subsidies for upstream oil and gas activities.

These subsidies include a tax reimbursement for exploration expenses, accelerated deductions on investments, research and development grants, the provision of seismic investigations by the Norwegian Petroleum Directorate, the provision of infrastructure and facilities by Gassco (a state-owned enterprise that operates the gas pipeline grid), and special treatment of the Snøhvit natural gas field in Northern Norway.

The subsidies constitute around 13 per cent of the oil and gas industry’s total revenue.

The report analyzes the gross impacts of the largest subsidies on government revenue, employment and carbon emissions.  However, the analysis does not calculate whether the net impact on the Norwegian economy would be positive or negative which would require taking into consideration how the subsidy savings could be reinvested into other sectors of the economy.

On a gross basis, the report finds that removing the investment deductions worth NOK 20.8 billion in 2009 and exploration reimbursement worth 4.0 billion could reduce government revenue from petroleum taxes by 8.1 percent and reduce employment within the oil and gas and supplying sectors by 0.5 percent. Removing these subsidies would also have a positive impact on reducing national carbon emissions by 1.5 percent. 

The report is intended to improve transparency regarding subsidies provided to the oil and gas industry in Norway, in order to foster a public debate on whether they constitute a good use of public funds.  A public seminar, ‘Subsidies or Incentives? Norway’s support for upstream oil and gas’, will present the key findings of the report on 16 February 2012, 08:30 – 10:30, at the Kjelleren room, Litteraturhuset, Oslo.

The report, Fossil Fuels: At What Cost? Government support for upstream oil activities in Norwayis part of a series of sector-specific studies that survey government subsidies by IISD’s Global Subsidies Initiative (www.globalsubsidies.org), a Geneva-based program. Other studies in the series have included Indonesia and Canada, and a fourth study for Russia will be released on 20 February in Moscow.

For more information or to register for the seminar, contact Kerryn Lang, Project Manager, +41 22 917 8920, klang@iisd.org , or Damon Vis-Dunbar, Communications Coordinator, +41 22 917 8848, dvis-dunbar@iisd.org