Oil and gas production a decisive factor for Denmark

Since 1972 oil and gas have been produced from the Danish sector of the North Sea much to the benefit of the Danish economy. Revenue from the oil and gas industry has been a decisive factor for Denmark at present boasting of one of the strongest economies in Europe,” claims Anne Højer Simonsen, from 2006 being responsible for the oil and gas sector of the Danish Energy Authority (DEA).

Positive balance
Production of oil and gas is one of three main components of the energy policy having provided Denmark with a unique position in the fluctuating market for oil. Denmark has grown into one of the main exporters of oil and natural gas, and we are number three in Western Europe after Norway and the UK.

Thanks to increasing the percentage of recoverable oil and the start-up of new fields like the Halfdan and South Arne oil production since 2000 has reached a stable level of some 20 million m3 per year. Whether this level can be maintained depends on future development of the technology, and, naturally, new discoveries.

Looking at known reserves to be produced using present methods, oil production culminated in 2004. But continuous development of technology and discovery of more fields should make it possible to maintain a high level of production for an-other 15 years.

Another important factor of the energy policy is the efficient use of the energy available. In that respect Denmark since 1980 has succeeded in increasing its gross national product by some 70% even if using the same amount of energy. Today Denmark is the country in the EU using its energy in the most efficient way. The third element of the energy policy has succeeded, too – Denmark is the country in the EU using most sustain-able energy. Some 20% of the fluctuating energy from wind turbines are integrated into the supply system without jeopardizing reliability.

“There is no contradiction between adjusting the Danish society to use more sustainable energy, use energy more efficiently and optimize production of our oil and gas resources. More sustainable energy easily goes hand in hand with a high activity within the oil industry, and it will strengthen our economy and supply of energy. Oil and gas will be in demand for transport and as a valuable raw material for the chemical industry for another many years,” claims Anne Simonsen.

Oil in place – production and reserves “New discoveries
and improved technology could mean that recoverable
reserves in 2020 are larger than in 1990. Some 20% of
the reserves could be produced by then.” DEA

“The high price level in the international market for oil supports the long-term scope for Danish energy policy by motivating the oil industry to develop its production technology and start producing from marginal fields. In addition, high oil prices stimulate the development of alternative energy and reduce the need for financing of newly deve-loped energy technologies. Furthermore, high prices make the consumers use the energy in a more efficient way.”

Danish skill
The oil industry is primarily concerned with production, but according to Anne Simonsen the authorities should constantly aim at improving conditions by initiating a more efficient hand-ling of applications for new development plans, environmental assessments and projects for an optimal HSE status in the oil industry.

“The most acute challenge for the rest of the society is, however, to recruit new talents for the oil industry. The government’s Energy Strategy 2025 calls for updating of a joint strategy for research, development and training of personnel for the oil and gas industry. It will demand special know-how and expertise to increase the percentage of recoverable oil and gas as much as we have seen in the latest 25 years.

The majority of the Danish oil and gas resources have been found in chalk formations that would not be regarded as commercial in most other countries. Consequently, geologists, geophysicists and oil engineers can hardly be recruited from abroad. But as oil easy to produce gets more and more scarce, fields of less permeability are getting increasingly interesting. By sheer necessity such fields have become the specia-lity of Danish operators and sub-contractors, so this situation could provide them with global opportunities. Furthermore, Danish operators are used to working in accordance with the high standards for HSE now more and more being mandatory in other countries as well. The Al Shaheen field in Qatar may hardly be the last field produced by a Danish operator due to Danish skills.

Use for more bright heads.
The government’s decision to train more specialists for the oil industry is caused by the uneven distribution of ages in the industry. From being considered a new and rather short-lived industry in the 1970es the government - A.P.Moller-Maersk agreement for an extension of the concession to 2042 creates a base for a long-term strategy by the operator responsible for the majority of the production in the Danish sector.

“We have to train bright and innovative heads if we want to go on producing. That goes for all disciplines – from electricians and welders to geophysicists and reservoir engineers. But at present we have an acute need for highly educated specialists. We have to merge research and training in a more efficient way. We have several research and training institutions providing valuable knowledge of the values in the underground, but we have to focus more on oil and gas when training geologists.”

Oil for many years
When the government in June 2005 issued its Energy Strategy 2025 its optimism regarding the potential for recoverable reserves created a certain attention, as the DEA had recently pointed out that Danish oil and gas production had culminated.

Anne Simonsen claims that the discrepancy is caused by the DEA using different calculation methods for its 5 years and for its more long-term prognoses.

Based on known reserves Denmark would have to import
oil by 2015, but the DEA expects new discoveries and
better production technology to make us self-sufficient
till 2040. DEA

“Our 5 years prognosis is based on known reserves, existing production plants and development plans. Consequently, such a prognosis provides a rather reliable base for a short-term estimate of the situation.

When working out a long-term prognosis we still use our 5 years prognosis, but add a – rather uncertain – extrapolation of expected development of technology. We look at how the existing and most costly infrastructure in the North Sea can be used at its best advantage, calculate the consequences of various price levels, and consider exploration plans and the chance of new discoveries.

That provides us with a number of scenarios defining the span within which we operate, and that was the background for the optimism of the government when issuing its strategy plan.”

Based on today’s techno-logy it is the assessment of the DEA that in spite of 40 years of intensive exploration of the Danish part of the Central Graben only some 70% of the recoverable oil and gas have been found. It is realistic to assume that the increasing amount of data being compiled and the more advanced production methods being developed could lead to improvement of the production of the resources.

Major economic contribution
The oil industry means a lot to Danish economy. In spite of its limited number of employees this industry through the years has deve-loped into one of the most profitable industrial sectors in Denmark. A one percent increase in production corresponds to an added income of some 40 billion DKK – and to two years of consumption of the entire country.

“We have calculated that the activities in the Danish sector of the North Sea contribute to our balance of payment with some 175 billion DKK making the oil industry provide a substantial part of the strong, Danish economy. The oil industry in 2005 paid 24 billion DKK in revenue, and at present the taxman gets two thirds of the net profit made by the DUC and the other operators.

So the activities of the oil industry will play a significant part in financing the welfare of our future, but fortunately we are in a situation where the commercial interests of the oil industry and the long-term requirements of society are entwined.

Anne Højer Simonsen
38 years old
1995: DEA Electricity supply office
1999: Secretary to the Ministry of Environment end Energy
2002: Secretary to the DEA. Project Manager, liberalization of the energy sector. Responsible for HSE monitoring of the oil industry. Visited most of the manned platforms in the Danish Sector
2005: Deputy Director DEA