PROPOSED AMENDMENTS TO SECTION 10 REGULATION – CONSULTATION PAPER

Draft amendments on consent to the transfer of licences and interest pursuant to Section 10 of the Petroleum Tax Act were submitted for consultation on 2 October 2026, with deadline for comments 2 January 2027.

The proposal contains five main elements: 

1. amendments to documentation requirements and disclosure obligations, including a requirement to document that a transfer is tax neutral,
2. adjustments to the rules on the year of consent and the effective date,
3. increased flexibility for agreeing contingent consideration,
4. extension of the scope to include transfers of licences for construction and operation of pipelines and other upstream infrastructure (PIO), and;
5. transactions to which Petoro AS (on behalf of the Norwegian state) is a party.
    

The proposal in our view contains several positive elements but also opens for interpretation uncertainties that should be further clarified by the Ministry. This applies in particular to the limitation of contingent consideration to conditions relating only to aspects of the licence itself. In our view, the most negative proposed change is repealing the seller's carry of the buyer's future decommissioning costs. 

The most positive part of the proposal is the MoF acknowledging the commercial need for more flexible contingent consideration elements. This includes an increased flexibility to agree contingent consideration. In our view, the deadline for meeting such conditions should however be longer than the proposed two years, as this would still allow the tax authorities to control the arrangement while giving companies more commercially realistic timelines. 

Another positive aspect is the inclusion under the Section 10 Regulation of transfers in pipelines and other upstream infrastructure. (Following the state takeover of Gassled, such transactions are limited to oil infrastructure and gas pipelines outside Gassled.)

Several of the proposed amendments would, if implemented, be topics to be regulated in sale and purchase agreements on the Norwegian Continental Shelf. 

1. The agreements submitted must be complete, including concurrent and associated agreements and annexes (and merger plans if relevant). The companies shall be jointly responsible for the submission, regardless of what has been agreed between the parties. Documentation shall be submitted only to the Oil Taxation Office (OTO), and no longer to the MoF.
    
2. The tax effective date may not be set in a year preceding the year of completion. For mergers, it is proposed that regulations stipulate that the effective date shall be 1 January of the year of the merger.
    
3. The flexibility for agreeing contingent consideration is increased, limited to conditions relating to aspects of the licence itself (such as production levels or drilling results). Conditions must be clarified no later than the end of the calendar year two years after the year in which consent is granted (the transaction year). Contingent consideration linked to future decommissioning costs may be agreed without this two-year time limit, including repayments to buyer of decommissioning consideration as part of security for buyer's fulfilment of its decommissioning obligations under the SPA. 
   
   Seller’s carry of buyer’s decommissioning costs (on a pre-tax basis) is proposed repealed. Seller’s carry of buyer’s exploration costs (on a pre-tax basis) is proposed limited to two years; the Ministry has expressly invited comments on this specific point.
   
   Negative consideration (payment from the seller to the buyer) is proposed to be expressly covered by the Regulation (i.e. subject to after-tax treatment). 
   
   The credit period for payment of cash consideration is limited to two years, running from the transaction year or, where contingent consideration applies, from the year in which the payment obligation becomes final.
    
4. Transfers of licenses in pipelines and other upstream infrastructure, which currently require individual MoF approval, will be covered by the regulations.
    
5. Transactions to which Petoro is a party will now be covered by the regulation. The rules are a codification of current individual approval practice (e.g. with respect to the extinguishment, rather than transfer, of depreciation and uplift balances when Petoro is the buyer).
    
6. The parties are required to document that the transfer is, on balance, tax neutral. If the parties disagree on the tax treatment and cannot document neutrality, this must be disclosed jointly.