Canadian tax authorities believe Equinor has not followed the rules, and will take another look at a barter from 2014.
The oil sands investment of Equinor – then Statoil – in Canada was controversial, controversial and costly.
From the Norwegian oil giant bought into Canadian Oil Sands Corporation for two billion dollars in 2007 until the company sold out in 2016, the known accounting losses were at least 13 billion kroner.
A new tax dispute with the Canadian authorities four years later could ultimately contribute to making the bill 3.35 billion kroner bigger:
The tax authorities in Canada will investigate what happened when Equinor sold out of 40 percent of the oil sand projects Koi Kos Dehseh in 2014.
– The case concerns the distribution of assets and deductions in a transaction in Canada, and the Canadian authorities have announced that they will look into this, writes communications director Erik Haaland in an e-mail to Nettavisen Økonomi.
In the company’s recent quarterly report, Equinor writes that the conflict could end in a lawsuit that could take several years. The oil giant estimates that the maximum exposure is 360 million dollars, or 3.35 billion Norwegian kroner.
The company has so far not made an account of such a payment becoming a reality, and believes they have not done anything wrong.
– We believe we have followed current regulations and that we have a strong case, writes Haaland.
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Barter with Thai oil company in Canada
Through the acquisition in Canada in 2007, the then Statoil took over the oil sands projects Kai Kos Dehseh (KKD) in Alberta. Four years later, in 2011, Statoil sold 40 percent of KKD to Thai Pttep for $ 2.3 billion.
The Norwegian oil giant’s presence in Canada was the subject of much negative attention from the media, environmental organizations and Norwegian politicians due to the high climate emissions associated with oil sands production.
Two years before Statoil decided to sell out of its oil sands business in Canada, the company entered into an agreement that the Canadian authorities will now take a closer look at:
In 2014, Statoil and Pttep agreed on a barter in the KKD licenses where the Thai oil company received $ 200 million and 100 percent ownership of the Thornbury, Hangingstone and South Leismer areas. Statoil continued as sole owner of the Leismer and Corner development projects.
– Both companies agreed that the best way to maximize the value of the KKD licenses is to divide the ownership. Thus, each of the companies can develop their licenses at their own pace, said the then Statoil Canada director Ståle Tungesvik when the barter was announced.
The Canadian tax authorities now believe that the way Pttep and the then Statoil distributed the units and assets was wrong – and therefore propose to look at the matter again.
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Large amounts of energy and fresh water are required to get the crude oil into the oil sands projects, because it is mixed with sand and clay. In May, Norges Bank expelled seven companies from the Government Pension Fund Global due to large climate emissions as a result of oil sands activity.
In its time, Equinor received massive criticism from several quarters for having entered oil sands, or ‘tar sands’ – as the environmental organizations called the oil. Last year, National Geographic called Canada’s oil sands “the world’s most destructive industry.”
The then strategy director John Knight told Dagens Næringsliv in 2015, a year before Equinor went out of oil sands in Canada, that:
“The potential climate impact of the oil sands project is much clearer now than it was in 2007, when we entered the project,” said Knight, adding later in the interview:
– If we had known what we know today, I do not think we would have entered the project.
In December 2016, Equinor sold its 100 percent stake in the KKD oil sands projects to Athabasca Oil Corporation. The company stated “portfolio optimization” and financial flexibility as the main reason why the company sold out.
The sale triggered write-downs of between 500 and 550 million dollars, excluding negative currency effects.
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