KPMG Norway - Business advice for all: Opportunities for competitiveness
Updated: Feb 6, 2019
Sustainable business and financial management of companies in industrial sectors influences the general performance of a sector, especially in capital-intensive activities such as oil and gas. Large global players are constantly looking for the best advisory partners and value their capability to provide consultancy and financial services in order to maintain healthy business structures, despite of the effects of the latest down-cycle. KPMG, one of the Big 4, has strong
interests to keep participating in the energy market and aims to continue working with the major oil and gas companies and to support them in the transition to a low carbon economy.
On the other hand, KPMG is aware of the substantial inflow of new players into the Norwegian energy market and is determined to become more involved with them. “We see that there will be quite many new companies coming into the energy market with the renewable’s market evolving. We believe that this is an important journey we want to contribute to,” says Mona Irene Larsen, Partner at KPMG Norway.
The needs of small and large players in the energy industry differ. Major companies have substantial in-house capacity and may not need the full range of services as smaller players
do. “It is however important for major companies to have us along as a discussion partner, not only to validate their work, but to provide constructive challenge and having an outside
perspective on how they operate and perform,” says M. I. Larsen. Even though there is more cooperation and dialogue between the big players in the industry today than before, it is still useful to have an independent outside-in view that can provide challenges and support in equal measure, and that is the role KPMG assumes.
Small players need support with tax compliance, asset deals, screening the market, and accounting. “It is important to be acquainted with the tax and regulatory side, especially when coming in from abroad,” comments M. I. Larsen. “One important role of KPMG as an advisor is to make sure that the ones coming into the market understand the tax area but also other regulatory implications of doing business in Norway,” mentions M. I. Larsen. The Partner at KPMG elaborates on the importance of co-dependency in the present and the vision to digitize the whole continental shelf. “Digitization has to be done throughout the entire value chain and this is a major undertaking given the interdependencies between suppliers, operators and participants in the licenses on the shelf. ” says M. I. Larsen.
While Norway is exposed to similar risks in comparison to the global market, the Norwegian system is regarded to be safe in terms of both political and regulatory risks. “Our tax regime still remains advantageous and hopefully will remain so. This is a significant advantage for companies operating in Norway,” states M. I. Larsen. In addition, KPMG considers that maintaining competitiveness is crucial since the oil and gas industry is a key pillar for the Norwegian economy. “The oil price drop that we experienced has been an advantage because it has forested cost-cutting, digitization, and automation which would not have happened to the same degree if the crisis had not lasted that long,” comments M. I. Larsen. To see projects being more profitable at USD $50 per barrel than back at the USD $100 per barrel price level just shows how dramatic the recent cost and operating improvements have been.
KPMG is a strong promoter of sustainable businesses. This is particularly true when it comes to the challenge of climate change which presents new risks and opportunities for businesses, especially in the oil and gas sector which is a major contributor to CO2 emissions. For proactive management, businesses need to understand the impact of climate change on their business models by measuring and assessing climate data and integrate them into core processes.
Along with almost every country in the world, Norway has committed to play an active part in keeping the global temperature rise to 2°C or less above pre-industrial levels. This is likely to result in increased regulation and taxation. Other risks that may have financial and reputational impacts for companies failing to make a successful commercial transition to the low carbon economy include disruptive (renewable) technologies and market dynamics changes. Conversely, opportunities can also be realized, for instance through the development of carbon capture and storage technologies and energy efficiency improvements that will impact positively on the bottom line as well as reducing carbon emissions.
Moreover, investors, lenders and insurers/capital markets are demanding more and better information on the financial risks corporations face from climate change as recommended by the Task Force on Climate-related Financial Disclosures. Climate related risk disclosure is very different from reporting carbon emissions or environmental impacts. It is about turning the telescope around, understanding the impact of a changing climate on the company and asking searching questions. KPMG combines its financial and sustainability expertise in order to assist its clients in making the transition to a low carbon economy and to provide reliable information on the process to their stakeholders.
The firm’s large client portfolio in Norway exemplifies its reputation. KPMG has been present in the Norwegian oil and gas industry since the 1970s and has participated in numerous M&As, has acted as a tax and regulatory framework advisor, and has supported new entrants in the market. In addition, the firm is now involved with cyber security, sustainability and climate related risk management where KPMG also advises on financial reporting. KPMG also works together with its German colleagues to capitalize on the opportunities in CO2 management to provide assurance and verification services promoting reduction in emissions.
The firm provides audit services to Statoil and Aker BP and has strong capabilities both in audit and advisory in the oil services industry. “We have a strong network, work very well together across borders and KPMG is therefore well positioned and able to bring our best resources in the field to our clients. The willingness to invest in our relationship before the pay-off is seen and the mindset that our clients’ success is our success is what really keeps us in the forefront,” concludes M. I. Larsen.