North Sea oil and gas generate billions in revenue

June 8, 2010
By Steen Hartvig Jacobsen, journalist.

Even though declining oil production and lower oil prices meant that the value of Danish oil and gas production from the North Sea dropped from 2008 to 2009, Danish society and the Danish treasury continue to generate billions of Danish kroner in revenue from this production. In its annual report Denmark’s Oil and Gas Production and Subsoil Use 2009, the DEA estimated the value of 2009 production at DKK 43 billion, of which DKK 24.6 billion has benefited the treasury.

In the years ahead, oil and gas production will also contribute substantially to financing Denmark’s prosperity.  On the basis of a five-year forecast of future oil and gas production, the DEA assesses that the Danish state can reckon with annual revenue from DKK 20 to DKK 26.5 billion until 2015, assuming that the oil price averages USD 95 per barrel. The average oil price was USD 61.1 per barrel in 2009, with an increasing trend over the year, and in the first quarter of 2010 the average price reached USD 78.

Denmark expected to be a net exporter for another eight to ten years
As from its 2009 report, the DEA has changed its classification system for oil and gas reserves, thus bringing it closer to the internationally widely used system from the Society of Petroleum Engineers, SPE. The DEA’s five-year forecast, which is based on expected field developments, shows a decrease in oil production from 15.2 million m3 in 2009 to 10 million m3 in 2014, while the volume of sales gas is expected to fall from 7.3 to 4.5 billion Nm3. In the long term, oil and gas production is expected to decline further, which means that Denmark can only expect to continue being a net exporter of oil until the end of 2018 and of gas until the end of 2020. However, new recovery technology and the development of new discoveries may change the assumptions for the DEA’s twenty-year forecast.

Maintaining a high level of oil and gas production in Denmark will greatly benefit society. The DEA seeks to encourage the operators to develop and test enhanced recovery methods and to develop strategies for exploiting marginal accumulations more efficiently. At the same time, we are pleased to note that the 6th Licensing Round has led to high exploration activity and that several companies are also interested in exploring areas outside the Central Graben in the North Sea. Therefore, we hope that the future will bring higher production than the current twenty-year forecasts anticipate, says Anne Højer Simonsen, Deputy Director General, the DEA.

This anticipation is triggered in part by promising accumulations in deep sandstone reservoirs in the North Sea: The natural gas discovery, Svane, which was described in detail in Denmark’s Oil and Gas Production and Subsoil Use 2008 and is currently being evaluated by DONG E&P as the operator for the licensees.

Improved energy efficiency of production
The annual report also shows that the energy efficiency of oil and gas production improved in 2009. CO2 emissions from the North Sea activities dropped by about 10 per cent from about 2 million tons in 2008 to about 1.8 million tons in 2009. Thus, the action plan to improve the energy efficiency of oil and gas production that the Minister for Climate and Energy and the operators agreed on last year seems to have had a positive effect. Fuel consumption was reduced by 6 per cent and gas flaring by as much as 35 per cent.

Only three hydrocarbon gas releases were reported in 2009. Since the DEA began focusing on accidental hydrocarbon gas releases, the total number of releases has dropped from 36 in 2004 to three in 2009.

There was a general increase in the number of work-related accidents per million working hours in 2009, but the number of accidents at offshore workplaces is still much lower than for similar industries on land, and the trend has been declining since 2003. On 15 November 2009, a fatal work-related accident occurred on the drilling rig Mærsk Resolute, the first fatality since 1997.

The oil and gas report also contains a description of geothermal energy production, with reference to the report published by the DEA on this subject in 2009.

The DEA’s revised classification system for oil and gas resources and the most recent forecasts (in Danish only) – read here
Why the energy efficiency of oil and gas production has increased – read here
How the DEA supervises offshore installations – read here
On- and offshore seismic surveys – read here