2014-03-27 21:52:08 - New Energy research report from Business Monitor International is now available from Fast Market Research
Denmark is likely to remain an oil and gas net exporter over our forecast period, despite production decline. 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 oil and gas volumes over the medium term. However, we forecast that overall production will decline in the long term and that exports will become increasingly thin by the end of our forecast period despite a small drop in consumption.
The main trends and developments in Denmark's oil and gas sector are:
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* We are forecasting oil reserves to slowly decline from current levels of 805mn barrels
(bbl) of oil to approximately 645mn bbl by the end of our forecasting period in 2023. 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 stagnate throughout the forecast period. We estimate that gas reserves will be approximately 40bn cubic metres (bcm) in 2018, from their current level of 43bcm. However, upside risk exists: Denmark could have sizeable shale gas resources. In December 2014, the US Geological Survey estimates that the Alum Shale in Denmark could contain about 193bcm of undiscovered, technically recoverable natural gas. This compares very favourably to Denmark's current gas reserves estimates of about 40bcm at the time of writing.
* We forecast that Denmark will most likely continue to be a net exporter of oil throughout our forecast period. In the short term, we expect Danish oil output to stabilise and perhaps to slightly increase from 2016 to 2018 to reach nearly 200,000 barrels per day (b/d). This will be thanks to new developments and work to increase output at mature fields. Past 2018, however, field depletion rates will most likely overtake the above-mentioned additional production, and we once again expect to see declining Danish oil production. We forecast Denmark's production to fall to 171,250b/d by 2023. This will come very close to our forecasted total petroleum consumption of about 145,500b/d in 2023.
* We estimate that in 2013, Denmark produced about 4.9bcm of gas, down from 5.6bcm in 2012 according to Danish Energy Agency oil and gas statistics. We forecast that Denmark will most likely continue to be a net exporter of natural gas up to and including 2023, although exporting in decreasing quantities to the Netherlands, Sweden and Germany as a result of declining production. In 2013-2015, we project gas production to continue its decline. Similarly to oil production, however, we forecast a temporary increase in gas production from 2015 to 2017, where production will rise from 4.75bcm in 2014 to a peak of 5.61bcm in 2017, Past 2017, 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.
* 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. In September 2013, it was announced that seven oil companies operating in the Danish part of the North Sea could face increased tax bills, which are expected to generate proceeds of US$5.10bn through 2040. The seven operators will see their production tax rate raised to around 62% of profit, compared with the current 35%. This creates downside risk to our forecasts, should companies decide to exit the market. Denmark's dependence on energy prices and its declining production offer a rather bleak picture for its hydrocarbons export revenues. Oil export revenues are expected to be around US$1.33bn in 2018. By 2023, we expect this to fall to US$0.80bn. Gas revenues are forecasted at US$0.99bn in 2018. This suggests that 2018 hydrocarbons export revenues will total US$2.32bn.
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