Oil and natural gas exploitation in the North Sea
The Danish production of oil and gas began in 1972 in the North Sea and steadily increased until 2004, where the production peaked. Amongst others due to the recovery of hydrocarbon, Denmark was self-sufficient in energy between 1997 and 2013. At the peak of oil and gas production in 2004, Denmark produced 56 percent more energy than consumed. However, the production of oil and gas has gradually reduced to less than one fifth of the production in 2004, and Denmark is now dependent on import of energy.
Since the beginning of production in the 1970s, the Danish oil and gas production has been an important contributor to building and maintaining the Danish welfare state through job creation and tax revenues. Nevertheless, it has come with a high price. At the same time fossil fuels has been the main reason behind the global temperature rises, which Denmark is actively working to limit to the Paris Agreement target of 1.5 degrees Celsius. Therefore, Denmark has now decided to bring oil and gas extraction from the Danish subsoil to an end.
Political agreement on the future of the North Sea
In 2020, a broad majority in the Danish Parliament reached an agreement on the future of fossil extraction in the North Sea, leading to a final phase-out date of fossil fuels extraction by 2050 an to the cancellation of the ongoing eighth licensing round and all future rounds to extract oil and gas. The agreement also establishes and lays out plans for a just transition of impacted workers as well as ensuring stability for the sector by locking the remaining regulation.
Denmark is currently one of the largest producers of oil in the EU. On a global scale, Denmark was number . With the new agreement on the future of the North Sea, Denmark is the biggest producer worldwide so far to establish a final phase-out date. Other countries to have done so all produce significantly less oil and gas than Denmark.
Acknowledging the historic contribution from the oil and gas sectors to building and maintaining the Danish welfare state, the agreement aligns the Danish oil- and gas activities with the national target for a climate neutral Denmark by 2050.
It is the intention to use the new green course in the North Sea to encourage all governments to undertake similar measures and join the Beyond Oil and Gas Alliance (BOGA) to promote a managed and just phase out of oil and gas production. BOGA will set a new bar for international climate leadership, create an international community of practice, and gather a group of ambitious governments that are committed to deliver a managed and equitable transition away from oil and gas production. Read more about Beyond Oil and Gas Alliance here.
Oil and gas production
In 2020, the production of oil was about 4.1 million cubic metres of oil, which is equivalent to 71.443 barrels of oil per day. This is only one fifth of the peak production in 2004. The tendency of a decreasing production is mainly because most oil fields in the Danish part of the North Sea have produced the major part of the expected recoverable amount of oil. Apart from that, the ageing fields require more maintenance of wells, pipelines and platforms, and maintenance often means lost or delayed production.
In 2020, the total production of gas was 1.4 billion normal cubic metres. This was a production decline with more than one half compared to the gas production in 2019, where the total production was 3 billion normal cubic metres. One of the main reasons for this drop in production of natural gas is the reconstruction of the Tyra field in the North Sea. Since 1987, the Tyra field has been the most important source of supply of natural gas for Danish and Swedish gas consumers. During the reconstruction period from , the gas field is closed, and therefore consumers are supplied with gas from Germany, Danish gas storages and biogas. After the reconstruction period, the gas field will function as planned until the phase-out in 2050.
Production prognosis of oil and sales gas
The Danish Energy Agency (DEA) annually prepares an assessment of the Danish oil and gas resources alongside a long-term production forecast. Read the last version published in September 2021 here (in Danish).
The long-term forecast is divided into three sections: the expected production profile, technological resources and prospective resources. The forecast is mainly based on the so-called technical resources, which means that the final date of production is not influenced by operating economics.
The expected production profile is a forecast of production from existing fields and discoveries based on existing technology. Technological resources is an estimate of the volumes recoverable by means of new technology. Prospective resources is an estimate of the volumes recoverable from future new discoveries made resulting from ongoing and coming exploration activity.
Latest forecasts show that after the reconstruction of the Tyra field, Denmark will remain a net exporter of natural gas until the mid-2030s while Denmark will remain a net importer of oil until the phase-out in 2050.
Government revenue and the North Sea Agreement
Since 1972, Denmark has earned around DKK 541 billion (2019 GDP-level) in revenue from the North Sea. . Revenue earnings have dropped significantly in recent years primarily due to decreased production.