The Norwegian state secures a large share of the value creation through taxation of the companies holding licences on the Norwegian Continental Shelf (NCS) and the system known as the State’s Direct Financial Interest (SDFI) in the petroleum industry. In addition, the state holds a 67% majority stake in the largest petroleum company, Statoil.

The petroleum taxation system is based on the rules for ordinary company taxation and are set out in the Petroleum Taxation Act (Act of 13 June 1975 No. 35 relating to the taxation of subsea petroleum deposits, etc). Because of the extraordinary returns on production of petroleum resources, the oil companies are subject to an additional special tax. The current ordinary company tax rate is 25 %, and the special tax rate is 53 %.

The production licence gives a company or a group of companies a monopoly to perform investigations, exploration drilling and recovery of petroleum deposits within the geographical area stated in the licence. The licensees become owners of the petroleum that is produced. A production licence may cover one or more blocks or parts of blocks and regulates the rights and obligations of the participant companies with respect to the authorities.

Production licences are awarded by the Ministry of Petroleum and Energy in numbered licensing rounds for the least explored parts of the shelf (frontier areas), or awards in predefined areas (APA) for mature parts.