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New Market Study Published: Denmark Oil & Gas Report Q1 2014

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2013-12-26 00:21:56 - New Energy market report from Business Monitor International: "Denmark Oil & Gas Report Q1 2014"

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 oil and gas volumes over the medium term. However, we forecast that Denmark will likely become a net oil importer soon after the end of our forecast period. Similarly, 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:

Full Report Details at

* We are forecasting oil reserves to hover around 810-850mn barrels (bbl) from

2013 to 2016, and to decline thereafter. We forecast proven oil reserves to be approximately 820mn bbl in 2017. Over the longer term, we expect reserves to decline to 710mn 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. We forecast that Denmark will most likely continue to be a net exporter of oil throughout our forecast period. In the short term, we project declining oil production for the period 2013-2015. From 2016 to 2018, we forecast a temporary increase in oil production, to reach 210,960b/d in 2018, when new fields are to be brought on stream and the planned development of existing fields will have been completed. Past 2018, 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 187,540b/d by 2022. This will come very close to our forecasted total petroleum consumption of 180,410b/d in 2022. We forecast total petroleum consumption in 2013 at an average of 163,260b/d, rising to 172,590b/d in 2017, and to 180,410b/d by 2022. The implication is that while Denmark is for now expected to remain self-sufficient in oil, net crude exports will likely finish near the end of our forecast period, or just afterwards if significant new domestic supply is not located.
* In the period 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 6.0bcm in 2014, to a peak of 6.8bcm 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.
* We forecast that gas production and consumption will both converge towards 5.6bcm and 4.7bcm 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. 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. Our forecast suggests that 2022 hydrocarbons export revenues will total US$0.47bn, down from its 2012 level of US$3.02bn.

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