Iceland will take its first step into the international oil world on January 15, 2009, when the Icelandic state will invite tenders for the rights to search for and harness fossil fuels in the so-called Dragon Zone off Iceland’s northeastern shore.
Iceland’s Althingi parliament agreed on a legal frame for inviting tenders for the project on Saturday. The National Energy Authority (Orkustofnun) will supervise the operations in the Dragon Zone, visir.is reports.
The Icelandic state will have the authority to establish a limited company on oil exploration and harnessing. However, the company will not operate like the Norwegian Statoil—its main purpose will be protecting Iceland’s interest in the Norwegian part of the Dragon Zone.
Taxes on possible revenue from oil production may be as high as 59 percent. It is a considerably lower percentage than in Norway but comparable to that in the Faroe Islands and Canada.
For the first 20 million barrels of oil the taxation rate on operations in the Dragon Zone will be five percent and then gradually increase to up to 58 percent of the production value.
Once the profits from oil production have surpassed 20 percent of revenue the operational tax will then be canceled and a carbohydrate tax, 5.5 percent to begin with, will be introduced instead.
The carbohydrate tax will then increase gradually in consistency with growing profits, up to 44 percent of revenue. A 15 percent income tax will then be added so in the end the Icelandic state could earn 59 percent of oil revenue.
Click here to read about a recent agreement between Iceland and Norway on oil and gas exploration in the Dragon Zone.