Danish oil production decline continues

In 2013 the Danish state generated revenue of about DKK 22.1 billion from oil and gas production, equal to about 63 per cent of total profits from activities in the North Sea.

This is a decline of about 12 per cent from 2012, when state revenue totalled DKK 25.2 billion. These figures appear from the DEA’s annual report “Denmark’s Oil and Gas Production and Subsoil Use 2013”, which has just been published.

The fall in state revenue is partly attributable to the fact that production is declining as the Danish fields age. Thus, oil production decreased to 10.2 million m3 last year, a 13 per cent drop on 2012, while sales gas production fell by about 18 per cent to 4.0 billion Nm3 in 2013. Oil production has fallen to slightly less than half of the peak production in 2004.

Amounting to about USD 109 per barrel in 2013, the average oil price remained at the 2012 level. However, in terms of DKK, the oil price declined by slightly more than 5 per cent due to the lower dollar exchange rate.

As expected, production from the Danish part of the North Sea is continuing the declining trend that started in 2004. The report says that the main reason for this trend is that the majority of fields have already produced the bulk of the anticipated recoverable oil. In addition, these ageing fields require more maintenance as regards wells, pipelines and platforms. This maintenance work often causes a loss or delay in production, as the wells and possibly even the entire platform must be shut down while the work is carried out. The development of existing and new fields may help counter the declining production. In addition, the implementation of both known and new technology may help optimize and increase production from existing fields, the report says.

Unplanned shutdowns

Last year saw a number of planned and unplanned shutdowns of various fields, which meant that only 12 out of 19 fields were actually in production during the last five months of 2013. The Siri, Nini and Cecilie Fields were particularly hard hit and were shut down during the second half of 2013 due to a crack being identified on 17 July 2013 in the tank console supporting the well caisson under the Siri platform.
The production from South Arne was affected by the further development of the field, consisting of the establishment of a new independent platform and the drilling of new wells north of the existing platform.

The first well under this development plan came on stream at the end of November 2013. The drilling of new wells and commissioning of the northern platform are continuing in 2014.The partners in the Sole Concession, which comprises 15 of the 19 producing fields in the Danish part of the North Sea, continued to focus on the maintenance of existing wells and platforms in 2013. A major modification was carried out at Tyra in both 2012 and 2013 in connection with optimizing the processing facilities, now placed at Tyra West. However, production was also impacted by unplanned shutdowns of several fields, including due to the replacement of a flare tip at Tyra West and of a riser valve at Harald

Sustained high activity level

The activity level remains high in the Danish part of the North Sea. In 2013 the oil companies invested about DKK 7 billion in the development of oil and gas fields, an increase of about 21 per cent on 2012. The DEA expects investments in North Sea fields to total DKK 49 billion over the next five years.

Denmark to remain a net exporter of oil through 2021

Denmark is anticipated to be a net exporter of oil for eight years up to and including 2021, based on the expected production profile. If technological and prospective resources are included, they will contribute substantially to reducing Denmark’s net oil imports from around 2025 until after 2035. 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. If technological and prospective resources are included, Denmark is estimated to remain a net exporter until after 2035.

For 2014 the DEA expects oil production to total 9.9 million m³, equal to about 171,000 barrels of oil per day; see table 2.2. This is a reduction of 3 per cent relative to 2013, when oil production totalled 10.2 million m
3. Compared to last year’s estimate for 2014, this constitutes a downward revision of 6 per cent, mainly attributable to the lower production figure expected by the DEA for the Halfdan Field. During the forecast period until 2018, the DEA expects a general decline in oil production; however, for 2016 and 2017, production is expected to increase, due mainly to production from the Hejre Field.

Compared to last year’s forecast, the DEA has revised the oil production estimate  downwards for the period from 2014 to 2018 by an average of 12 per cent, mainly as a result of the lower production expected from the Halfdan Field and the postponed production startup of the Hejre Field.

7th Licensing Round initiated

The DEA has opened the 7th Licensing Round for new licences for oil and gas exploration and production in the western part of the North Sea. The deadline for licensing round applications is 20 October 2014. New licences are expected to be issued in early 2015, and seismic surveys and exploration drilling under the new licences are anticipated to help maintain the activity level in the North Sea in the years ahead.

New resource assessment

According to the assessment in the report, Danish oil and gas reserves amounted to 107 million m3 of oil and 37 billion Nm3 of sales gas at 1 January 2014. Compared to the previous assessment at 1 January 2012, reserves have been revised downwards by about 16 per cent as a result of the oil and gas produced over the past two years.