2013-09-21 09:06:17 - Recently published research from Business Monitor International, "Denmark Oil & Gas Report Q4 2013", is now available at Fast Market Research
Denmark is hoping to avoid becoming an oil and gas importer for another few years, despite declining production. The government is confident the country will sustain its position as a net exporter of oil and gas until the end of the decade. We expect a partial recovery in volumes over the medium term. However, we forecast that Denmark will become a net oil importer by 2019, while gas exports will become increasingly thin by the end of our forecast period.
The main trends and developments in Denmark's oil & gas sector are:
* We are forecasting oil reserves to hover around 880-890mn barrels (bbl) from 2013 to 2016, and to decline thereafter. We forecast proven oil reserves to be approximately 880mn
bbl in 2017. Over the longer term, we expect reserves to decline to 740mn bbl by 2022. There is upside risk to our reserves forecast from New World's Danica Jutland prospects and from Wintershall's Hibonite discovery.
* We expect gas reserves to progressively decline throughout the forecast period. We estimate that gas reserves will be approximately 40bn cubic metres (bcm) in 2017, from their current level of 52bcm. Over the longer term, we forecast reserves to decline to 38bcm by 2022.
* We believe that Denmark will most likely continue to be a net exporter of oil until 2019. In the short term, we project declining oil production for the period 2013-2015. From 2015 to 2017, we expect a temporary increase in oil production, to a reach 215,200b/d in 2016, when new fields are to be brought on stream and the planned development of existing fields will have been completed. Past 2017, however, field depletion rates will most likely overtake additional production, and Danish oil production will once again decline. We forecast Denmark's production to fall to 150,200b/d by 2022.
* Oil demand in 2013 is forecast by BMI at an average 160,000b/d, rising to 167,700b/d in 2017, and to 176,300b/d by 2022. The implication is that net crude imports will have reached 26,100b/d by the end of the forecast period, if significant new domestic supply isn't located.
* In the period 2013-2015, we project Danish gas production to continue its decline. Similarly to oil production, however, we forecast a temporary increase in gas production from 2016 to 2018, where production will rise from 5.1bcm in 2015, to reach 6.5bcm in 2018. Past 2018, we expect Denmark's gas production to once again decline. The significant Svane gas discovery is unlikely to be developed, and is therefore not taken into account in our forecast.
* We forecast that gas production and consumption will both converge towards 4.9bcm and 4.8bcm respectively by 2022, indicating that the country's modest exports are likely to come to a halt not long after the end of the forecast period.
* The DEA points out that if domestic oil producers succeed in raising the average field recovery factor by five percentage points to an expected 26% rate until 2035 and beyond, and if the DEA's expectations for the exploration potential are realised, Denmark will be able to maintain its position as a net exporter of oil until 2035.
* DONG Energy and Bayerngas have decided to jointly undertake the development of the Hejre field in the Danish North Sea at a cost of DKK12.1bn. Dong E&P expects production to reach 150,000 (boepd) by 2020, of which 35,000b/d of oil and 2.13mn cubic metres of gas per day (0.78bcm per annum). Commercial operations are expected to start by the end of 2015.
* Maersk Oil is to invest US$800mn in the development of a new unmanned platform in the Danish North Sea in partnership with the Danish Underground Consortium. The Tyra Southeast project is expected to boost Denmark's annual productivity by 50mn barrels of oil equivalent over the next 30 years.
* Denmark's dependence on energy prices and its declining production offer a rather bleak picture for its hydrocarbons export revenues. Oil export revenues will, in 2017, remain around the estimated US$1.50bn forecast by BMI for 2013, with US$0.9bn of net imports expected by 2022. Gas revenues are estimated at US$1.1bn in 2013, falling to US$1.0bn in 2017. This suggests that 2017 hydrocarbons export revenues will total US$2.50bn. At the time of writing, we assumed a decrease in OPEC basket oil prices from their average of US$108.00 per barrel (bbl) in 2013 to US$96.50/bbl in 2017. The assumption for 2022 is US $91.55/bbl.
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