Danish Energy Agency releases annual report

September 1, 2013

The Dan field – 40-years on from the start of Danish offshore oil and gas production on July 4, 1972.The Danish offshore is a mature oil and gas province with 40 years of production, but the Danish Energy Agency’s latest annual report,* says that the country is expected to remain a net exporter of oil through 2020, while gas production is estimated to exceed domestic gas consumption through 2025. This is threeyears longer than estimated one year ago, due to an expected decline in future domestic gas consumption.

The Danish sector of the North Sea is a mature area and the Danes’ primary focus is on optimizing current production and maintaining existing installations. Exploration continues, and investments are still being made in new production installations. In 2012, investments in exploration activity totaled about DKK 1.2 billion (US$214 million), of which investments in new installations accounted for about DKK 5.7 billion, an increase over 2011.

Dan, Tyra, Dagmar fields

July 4, 2012 marked the 40th anniversary of Danish oil and gas production, which began at the Dan field, still producing today. Since 1972, close to 28% of total Danish oil production has been extracted from the Dan field, and current projections are that the field will keep producing well into the future.

A comprehensive plan for the further development of Maersk’s Tyra Southeast field was approved on 20 November 2012. Start-up is targeted for spring 2015. The plan includes a new four-leg platform to accommodate 16 wells. The new platform will be connected to the existing TSEA platform by a bridge. A new pipeline will run from the Tyra East platform to the new platform to supply lift gas to both new and old wells. Power supply and control signal cables will be laid parallel to the pipeline. Based on the 12 production wells planned initially, total production from the field is expected to increase by around 3.3 million cu.m of oil and around 4.6 billion cu.m of gas. Total investments in connection with the development are estimated at DKK 5 billion. Bladt Industries, in Aalborg is building the new 1100-tonne platform and bridge. Delivery is scheduled for May 1, 2014.

A clarification of the future of the Dagmar field, which has been closed since 2005 due to poor or non-existent hydrocarbon production, is expected in 2013.

State revenue

In 2012, the Danish state generated revenue of about DKK 25.2 billion from oil and gas production, a decline of about 15% from 2011, when state revenue totaled DKK 30.3 billion. The fall in state revenue is partly attributable to decline in production as Danish fields age. Thus, oil production decreased to 11.7 MMcm last year, a 9% drop from 2011, while sales gas production fell by about 14% to 4.9 Bcm in 2012. Oil production has halved since production peaked in 2004.

Amounting to about $110/bbl in 2012, the average oil price remained at the 2011 level. However, in terms of Danish kroner, the oil price rose by slightly more than 11% due to the higher US dollar exchange rate. Based on an oil price of $125/bbl, total state revenue from North Sea production is estimated at DKK 24-30 billion/yr for the next five years.

New licensing round

The DEA is preparing a new licensing round, covering the area in the Danish sector of the North Sea west of the 6° 15’ east longitude. The aim is to officially open the seventh round at the end of this year. The most recent licensing round (sixth) was held in 2006. The rest of the Danish licensing area is offered for licensing according to the Open Door procedure introduced in 1997.

The success rate for wells drilled under the sixth round license remains high, at 80%.

Wintershall Noordzee, operator for license 5/06, drilled the Hibonite-1 (5504/1-3) exploration well in the western part of the Danish North Sea in 2012. Bayerngas and EWE, and as the Danish North Sea Fund, were also partners in the well, which discovered oil in Upper Jurassic sandstone. Hibonite-1 was drilled as a deviated well and terminated in Jurassic clay at a vertical depth of 4,431m below mean sea level. Wintershall took cores and logged the well. Oil and gas were produced during testing. In order to assess the extent of the oil discovery, two sidetracks were drilled, Hibonite-1A and Hibonite-1B. Both sidetracks confirmed the presence of oil-bearing sandstone of Late Jurassic age.

In April 2012, Denmark’s minister for climate, energy and building agreed on a new action plan for 2012-2014 with Danish operators, aimed at reducing energy consumption offshore. The new action plan is based on valuable experience gained from the previous action plan for 2006-2011, which successfully reduced energy consumption by 18%. A preliminary estimate shows that energy consumption was reduced by about 20% in 2012, thus achieving the target for the year. The targeted efforts to reduce energy consumption on the North Sea installations brought the total CO2 emissions down to about 1.7 million tons in 2012, the lowest level in the past 10 years.

In 2012, the DEA carried out a total of 40 inspections of installations in the North Sea and onshore, safeguarding health and safety standards for the almost 3,000 people who work on North Sea installations. In 2012, the DEA registered 12 reports concerning work-related accidents on offshore installations and mobile accommodation units. The accident frequency—defined as the number of accidents per million working hours —has dropped by 70% since 2004, and is far lower than the average accident frequency for all onshore industries.

State participation

On 9 July 2012, the state-owned company ‘Nordsøfonden’ (the Danish North Sea Fund) joined Dansk Undergrunds Consortium (DUC) as a partner with a 20% interest. The Danish North Sea Fund has, therefore, taken over a substantial share of production activity in the North Sea and has become a co-owner of the relevant platforms, processing facilities and pipelines. State participation was one of the main requirements set out in the North Sea Agreement of 2003, regarding the extension of DUC’s sole concession until 2042. Maersk Oil and Gas is the operator of the concession, the other partners being Shell and Chevron, and now the Danish North Sea Fund. OE

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