Danish State Producer Welcomes E&P Clarity (Update)
(Adds analyst comment)
The Danish parliamentary vote December 3 to wind down the country's upstream oil and gas industry "provides a clear framework and security for the industry," said the state producer Nordsofonden [=North Sea Fund].
"It ensures the continuation of the existing activities in the Danish part of the North Sea and provides opportunities for future mini-rounds and neighbouring block licences. Nordsofonden looks forward to continuing to produce energy and raw materials for the Danish society," it said December 4.
Like Petoro in Norway, Nordsofonden handles the state's participation in the majority licences for exploration and extraction of oil and gas. It was set up in 2005.
Nordsofonden will continue to focus on creating the greatest possible value for Danish society and work to support a high degree of self-sufficiency in energy for Denmark. A key element of this work is the redevelopment of the Tyra field operated by French Total. When back in operation, the Tyra facilities will once again be the central hub for the vast majority of gas produced in the Danish part of the North Sea. The new facilities will also be significantly more energy efficient than their predecessors, it said.
The new agreement also allocates funds to explore the possibility for capture and storage of CO2 in the subsoil and to analyse the potential for electrification of the Danish production of oil and gas. Nordsofonden sees great potential in CCS technology and it is "already investigating the possibilities for electrification of facilities in the Danish part of the North Sea together with our licence partners. These technologies will contribute towards Denmark's goal of a 70% reduction in CO2 emissions by 2030."
“When the calendar reads 2050, the oil and gas valves will be turned off for good, in line with our commitment to climate neutrality stipulated by the Danish Climate Act. We will cancel all future licensing rounds marking an end to fossil exploration by state invitation in Denmark, effective immediately,” said energy minister Dan Jorgensen.
"We intend to show what an ambitious yet balanced phase-out of fossil fuel production might look like, taking into account both the urgency of climate change and the very real concerns of workers employed in the fossil sector. Just transition has to be part and parcel of any socially balanced approach. Hopefully we can inspire others to follow suit," he said.
The accumulated revenue losses of this agreement are around $13bn in the period 2020-50, the ministry said.
Last year Denmark produced about 3.2bn m³ gas and oil output was about 103,000 barrels/day making it the largest in the European Union but far behind Norway and the UK. Its move away from upstream gas has been steady. The national producer Dong rebranded itself as Oersted three years ago. It sold its stake in the Norwegian Ormen Lange field and all its other upstream assets to UK petrochemicals firm Ineos in September 2017 to focus on offshore wind and other renewable energy.
Shrinking output means imports rise: GlobalData
Analysts at GlobalData said that the problems restarting Tyra have affected Denmark's economy as it has imported oil and gas.
"There is still upside in existing Danish oil and gas fields, as Total and partners (Danish Underground Consortium) continue to invest in the Tyra and Halfdan areas. However, Covid-19 related delays to the restart of the Tyra oil and gas facilities deal a further blow to Danish hydrocarbon production in the near term. As domestic gas production declines and the Tyra hub remains offline, imported gas volumes to Denmark have accelerated and 2020 has seen a rise in imported gas so far. After many years of being a net exporter, Denmark has recently become a net importer of oil and gas."
They also said that the decision might impact "the neighbouring UK, which recently announced that it was planning to review its oil and gas licensing round process in the context of achieving net-zero emissions by 2050."