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Earlier this week, Norway held elections for its government and the conservative side (not one party, but a coalition of parties) came out successful. Because Statoil (NYSE:STO) is mostly owned by the Norwegian government and operates under Norwegian tax codes, the implications of the elections for the company will be pretty big.

Led by Ema Solberg, the new government will be hoping to privatize some companies partially or entirely, while lowering tax rates for businesses to make the environment friendlier for enterprises. Earlier in the summer, the current (soon to be former) government proposed increasing taxes on petroleum in order to increase the revenues of the government. This had led Statoil to cancel or postpone some of its projects due to higher costs.

The Norwegian government currently owns 67% of Statoil; however, this will probably come to a change with the new government. The conservative coalition wants to reduce government's ownership in Statoil by as much as 16%. In the short term, this may put a price pressure on the company's shares and there might be a sell-off (even more so if the government decides to dump these shares at a deep discount), however, in the long run, this is a good move as the company will get to act more like an enterprise than a government institution.

Ema Solberg's government also expects to reduce oil spending by the government. The limit for the oil spending is expected to be limited around 3-4% in order to keep Norway's inflation rate rather stable. While Statoil conducts a lot of business in Norway, the company is not completely dependent on the country for its oil production or income. After being founded in Norway, the company successfully formed many international partnerships with other oil giants and it diversified its portfolio in order to compete with other oil companies.

It will be interesting to see if Statoil restarts its Johan Castberg project once it knows for certain that the oil tax will not be increasing for the foreseeable future. The Johan Castberg project is as large as $16 billion and if successful, it can add a lot of value to Statoil. Then again, if the project turns out to be as costly as Statoil once feared, it might not be feasible to work in this project.

Since most of the conventional (and relatively easy-to-extract) oil in the world is already discovered, many oil companies are looking for alternative sources, such as the Arctic sea and the oceans. Much of the unconventional oil reserves are located in places where only a few companies like Statoil and Exxon Mobil (NYSE:XOM) have expertise and technology to extract oil. This is why the Russian government entered into a partnership with Exxon Mobil last year for the oil reserves in its northern parts. Apparently, Exxon Mobil will provide the Russians with the technology and expertise that is needed to extract oil in difficult geographies where the temperatures are at extreme levels. As a matter of fact, Statoil will also be searching for oil in northern Russia in the coming years.

At least, the "unconventional" oil reserves are located in regions where there aren't many political conflicts though. When you look at it, most conventional oil in the world is located in parts of the world where wars, terrorism, coups, dictatorships and other political instabilities have been ongoing for decades (for example, the Middle East, North Africa and Latin American countries like Venezuela). On a positive note, the unrest in many of those countries actually help oil companies by keeping oil prices high. For example, the war worries in Syria helped a spike in oil prices last week and I am sure that many oil companies will benefit from the spike.

Traditionally, Statoil spends a big chunk of its income on taxes. For example, in 2012, the company's income tax rate was 28%. In addition, the company was subject to a petroleum tax of 50%, causing it to have an effective tax rate of 78% for its operations in Norway. Last year, prior to taxation, Statoil's operating income was $34.93 billion; however the company's after-tax income was as low as $11.65 billion. Interestingly enough, the outgoing government of Norway was proposing to increase these taxes even further. If the new government decreases Statoil's tax obligations by 1%, this will result in extra income of $350 million for the company. Since government is the biggest shareholder of Statoil and it collects dividends from the company, it should be more flexible in taxing Statoil. Norway also taxes dividends heavily, which might also come to a change with the new government. A lower dividend tax means that people can keep more of their dividend checks and those that are reinvesting their dividends would be able to purchase more stocks, helping the stock price in process.

Statoil earned $2.02 per share in the last year, which gives it a P/E ratio of 11. The company is expected to earn $2.58 this year, $2.68 next year and $2.80 in 2015. These earnings can support share prices close to $30 within the next 2 years. Keep in mind that while the company's dividend rate varies greatly from year to year, it tends to have decent yields. For example, the yield was 5.1% this year, 4.82% last year, 4.64% in 2011 and %4.65 in 2010. The exact yield will depend on currency exchange rates and the company's annual earnings; however, the investors can usually expect a yield around 4-5% annually.

I believe that the new government of Norway will be beneficial to Statoil's prospects as it promises to lower taxes in order to allow companies with more room to operate in.

Disclosure: I am long STO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.