The production of oil and gas in the North Sea is of great value to society in the form of tax revenue, the effects on the balance of trade and payment and by means of the profit from the oil and gas sector.
Oil and natural gas exploitation in the North Sea
The Danish production of oil and gas started in 1972 in the Danfeltet. Since then, the production of oil and gas has increased significantly. The recovery of hydrocarbon has contributed to Denmark having been self-sufficient in energy since 1997. Furthermore, the oil and gas production creates jobs for a lot of people, ashore and offshore.
In Denmark extraction rights of oil and gas are normally allocated by rounds of tenders and by means of an "open-door-procedure" implemented by the Danish Energy Agency. In more recent permissions, the Nordsøfonden, that represents the interests of the state, participates by 20 %.
Oil and gas production
In 2014 the production was about 9.6 million m3 of oil equivalent to 165.000 barrels a day. This was a drop of the oil production by 6 % as compared to 2013 and more than a halving as compared to the oil production in 2004. This 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 2014 the total gas production was 4.5 billion Nm3. Of this amount 3.8 billion Nm3 gas were sent ashore as sales gas, which was a drop of 4 % as compared to 2013.
Production prognosis of oil and sales gas
Except for a few years, Denmark is expected to be a net exporter of oil up to and including 2026. If expectations for technological improvements and potential new findings are included in the calculation, the period as a net exporter will be prolonged up to and including 2032.
As to natural gas, the production of sales gas is expected to exceed the domestic gas consumption up to and including 2032 apart from some years. If the calculation includes technological resources and investigation potential the period will be prolonged up to and including 2035.
Government revenue and the North Sea Agreement
Government revenue originating from the oil and gas production in the North Sea for 2014 amounts to DKK18.8 billion, equalling 62 % of the total revenue. Earnings dropped by close to 15 % as compared to 2013, which is due to a decrease of the production and an important setback of the oil price during the last six months of the year.