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November 1st, 2014

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An industry in decline since 2004, Danish oil and gas production might very well have reached a turning point. 

A record number of oil companies have made bids in the seventh licensing round for the right to explore and drill for oil and gas in the Danish North Sea. 
While many of its EU neighbours rely on imported gas for much of their energy needs, Denmark has been supplied domestically since the 80s and is a net exporter of natural gas. 

But since 2004 the industry has been in decline, primarily due to the exhaustion of many of the fields, an ageing infrastructure that requires maintenance and delays in production.

Stable exploration environment
In the face of these challenges, the Danish energy agency Energistyrelsen’s hopes for the industry are twofold: the development of new fields and the improvement of old 
ones.

Regarding new field development, Energistyrelsen finds encouragement in the interest the most recent licensing round attracted. 

Some 25 bids had been submitted by noon on Monday – a far greater number than in the previous six bidding rounds.

Very pleasing, notes minister
“I am very pleased with the number of applications in the bidding round as it confirms there is still a belief that interesting finds can be made in the Danish arena,” noted Rasmus Helveg Petersen, the climate and energy minister.

“It’s positive because it allows us to maintain a stable exploration environment and invest in highly-specialised jobs in Denmark.”

No new discoveries
In its annual summary of Danish oil and gas production, published earlier this year, Energistyrelsen stated that no commercial discoveries had been made in the area concerned. 

There was an increase in the activity of companies that undertake seismic studies to resell to oil companies for identifying prospective reserves.

New tax rules beneficial
One new field, the Hejre Field, is already under development. The field development plan was approved in 2011 and Dong Energy is the operator.

Among the companies to submit bids in the seventh round were Dong Energy, Hess, Maersk Oil & Gas and Shell.

The increase in bids could be explained by this bidding round being the first since the government changed the taxation rules regarding North Sea oil excavation last year.

Danish oil and gas production: 

• Oil production in 2013 totalled 10.2 million cubic metres – a 13 percent decline compared to 2012
• Natural gas exports fell by 18 percent to 4 billion normal cubic metres
• There were a number of planned and unplanned shutdowns of Danish oil fields in 2013, which meant only 12 of the 19 fields were in production during the last five months of the year
• Reserves have been estimated at 107 million cubic metres of oil and 37 billion normal cubic metres of gas. 
• Denmark is anticipated to be a net exporter of oil for eight years, up to and including 2021, based on the expected production profile
• Denmark is anticipated to be a net exporter of sales gas for 12 years, up to and including 2025, based on the expected production profile

Source: Energistyrelsen