Denmark has agreed to ban new exploration and end its oil and gas production from the North Sea by 2050 as part of the country's efforts to become "climate neutral" in the coming decades.
Following a political deal with the parliament, the government said Dec. 4 it had agreed to the cancellation of its planned eighth offshore licensing round and all future North Sea licensing rounds as part of the deal.
Denmark, for years the third-largest oil and gas producer in Western Europe behind Norway and the UK, became a net oil importer in 2018 after 25 years as a net exporter due to output declines in the North Sea.
"We are now putting an end to the fossil era, and drawing a straight line between our activities in the North Sea and the Climate Act's goal of climate neutrality in 2050," Climate Minister Dan Joergensen said in a statement.
Denmark, which became a North Sea producer in 1972, has seen its output of both oil and gas decline for years.
More than half of Denmark's current oil output is produced from the Halfdan and Dan fields which have been in decline since 2005 and 2001, respectively.
Oil production peaked in 2004 at 390,000 b/d but has been averaging about 70,000 b/d this year, according to Denmark's DEA data. Gas production peaked in 2005 at 9.2 Bcm and has recently been around 136 MMcf/day, the government data shows.
The aging Tyra field, Denmark's largest gas field, is integral to the Danish gas industry, with more than 90% of the country's production processed through its facilities. But the field closed in September last year for redevelopment work due to seabed subsidence and is not expected to restart production until mid-2023. As a result, Denmark's oil and gas output is expected to recover briefly by 2025 before resuming its decline.
Denmark's offshore industry is dominated by Total which operates a 43% share of the Danish Underground Consortium. The other partners of the consortium are Norway's Noreco (36.8%) and the state's Nordsofonden (20%). The consortium currently operates 15 fields, all located in the Central Graben sector of the North Sea. covering some 90% of the Danish oil and gas production.
CARBON NEUTRALITY
Denmark is the second European country to set a date for a ban on oil and gas production after France in 2017 agreed to phase out fossil fuel production by 2040 and halt the granting of new exploration permits. Ireland banned new on-shore and offshore oil and gas exploration in February 2018.
Denmark last awarded 16 new licenses in its seventh bidding round for exploration of oil and gas in the Danish part of the North Sea in 2016. DONG Energy, Edison International, Hess, Wintershall, and a number of smaller players as well as Danish state oil and gas company Nordsofonden picked up blocks in the round.
Last year, Denmark adopted an ambitious new climate law committing to reach 70% below its 1990 emissions by 2030. The law targets carbon neutrality by 2050 and includes a robust monitoring system.
Greenpeace applauded Denmark's move to end oil and gas production and exploration and called on the UK government to follow suit.
"This is a watershed moment. Denmark will now set an end date to oil and gas production and bid farewell to the future licensing rounds for oil in the North Sea, so the country can assert itself as a green frontrunner and inspire other countries to end our dependence on climate-wrecking fossil fuels. This is a huge victory for the climate movement and all the people who have pushed for many years to make it happen," Greenpeace said.
"If [UK Prime Minster Boris] Johnson wants to keep up and build global momentum for the clean energy transition, he must cancel the next round of oil and gas licensing, end all future exploration and ditch the legal requirement to extract as much as possible from the North Sea basin."
Denmark's Jorgensen said that the move is expected to reduce state revenues by some DKr13 billion ($2.1 billion), with production by 2050 now expected to be at least 9%-15% less than it would have been.
As of January 1, 2018, Denmark's official reserves and contingent resources stood at 139 million cu m of oil, or some 874 million barrels, and 72 Bcm of gas. According to BP, at the end of 2019, Denmark's proven oil reserves stood at around 400 million barrels.
