Petroleum taxation: Experience and issues 1 by

• Main Authors: Kjell Løvås, Petter Osmundsen, Statoilhydro Asa
• Other Authors: The Pennsylvania State University CiteSeerX Archives
• Format: Text
• Language: English
• Subjects: Helgeland; Norway
• Online Access: http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.529.622; http://www1.uis.no/ansatt/odegaard/uis_wps_econ_fin/uis_wps_2009_8_lovas_osmundsen.pdf

Topical issues in petroleum tax design are in this chapter discussed by means of a tax model for a net income tax system (Norway) and a representative PSA regime. We analyse the entire life cycle of a typical petroleum project, i.e., the exploration decision is included. Many petroleum tax systems are regressive, and thus not able to cope with high increases or decreases in the oil price. Accordingly, many countries are seeking to include progressive elements in their tax system. We discuss the trade-off between progressivity on the one hand and the optimal sharing of risk and investment between the oil companies and the host government on the other. Optimal risk sharing and optimal allocation of cash flow over the project lifetime between host government and international oil company, often call for the oil company to fund the initial investments. The high front end loading of costs and the high risk on part of the oil company, calls for it to keep a substantial part of the upside if the project is successful. This limits the 1 We would like to express our thanks for rewarding conversations with and comments on the article itself from a number of key specialists in the oil sector and academia, in particular Flemming Helgeland, Michael Keen, Per