The Danish state recorded record revenue from the production of oil and natural gas in the North Sea in 2008.
15 June 2009
By Steen Hartvig Jacobsen, journalist
The Danish state recorded record revenue from the production of oil and natural gas in the North Sea in 2008. The DEA has just published its annual report on Denmark’s oil and gas production. It appears from this report that the state generated revenue of DKK 35.9 billion in the form of taxes, fees and profit sharing from production in the North Sea in 2008, equivalent to about 65 per cent of the oil companies’ total profits. The value of Danish production has been calculated at DKK 67 billion.
Since peaking in July 2008, the oil price has dropped dramatically, although stabilizing in recent months. The Ministry of Taxation estimates that the state can expect revenue of about DKK 20 billion a year during the next three years, based on an oil price of USD 60/barrel. Production from the North Sea also has a major impact on the balance of payments, which improved by DKK 26.6 billion by virtue of a surplus on the balance of trade for oil and natural gas.
More energy-efficient production
The decline in Danish oil production reflects that production from most Danish fields has peaked, and special efforts are required to prevent a major drop in production. The energy consumption associated with oil and gas production has remained fairly constant in recent years, accounting for about 4 per cent of Denmark’s total gross energy consumption, although production has declined steadily since 2004.
- Society has a manifest interest in the oil companies recovering as much of the oil- and gas-in-place from the North Sea as possible. This is an important source of financing for the Danish welfare state, but production to date has required highly energy-intensive recovery methods. Considering that the Danish Government has decided to cut Denmark’s gross energy consumption by 2 per cent during the period 2006-2011, we had to take action.
- To reconcile these opposing interests, we have collaborated with operators in reviewing how production could be made more energy efficient. Fortunately, this review showed that we can achieve a great deal when this goal is prioritized. Instead of an increase in consumption of 1.5 per cent until 2011, production from the North Sea in that period will require 3 per cent less energy, and the North Sea activities will therefore help us reach the overall energy savings target. But our collaboration with operators has a further aim, because we can presumably save even more, for instance by changing the pressure conditions in the transmission grid and establishing joint and efficient power supply for all production facilities in the North Sea, says Anne Højer Simonsen, Deputy Director General.
Together with the DEA and Energinet.dk, the operators are implementing an action plan that contains a large number of specific initiatives and analyses.
Self-sufficiency expected for another 20 years
Denmark is the only EU Member State that is a net exporter of energy, but this position will come under pressure in the years to come because oil production is declining. The DEA’s most recent forecast shows that Denmark can maintain its self-sufficiency in both oil and natural gas for another ten years or so, based on known reserves. However, on the basis of historical experience, the DEA expects that the use of innovative recovery technology and more discoveries resulting from exploration can uphold Denmark’s self-sufficiency in oil and natural gas for another ten-year period.
Based on a development plan submitted by Hess Denmark, increased production is expected from the South Arne Field, and DONG Energy E&P expects to bring the Hejre Field on stream in 2014. In the longer term, DONG Energy E&P’s Svane discovery holds exciting potential, as gas deposits in Svane may prove even larger than those in the Tyra Field, which is projected to produce a total of more than 100 billion Nm3 during its lifetime, corresponding to 25-30 years of natural gas consumption in Denmark.