O&G Earnings for Denmark Total DKK 28B in 2007

The production of oil and natural gas, combined with continued high oil prices, meant that the Danish state generated close to DKK 28 billion (US $5.8 billion) in taxes and fees from the activities in the North Sea in 2007. Oil production declined by about 9 percent from 2006 to 2007. Denmark is expected to be self-sufficient in oil for the next ten years. This appears from the report “Oil and Gas Production in Denmark 2007”, which the DEA published today.

The oil produced from North Sea fields totalled 18.1 million m3 in 2007, about 9 per cent less than in 2006 and about 20 per cent less than in 2004, when oil production peaked at 22.6 million m3. In 2007, gas sales from North Sea fields came to 8 billion Nm3, about 13 per cent less than in 2006.

The Danish state realized about DKK 28 billion in the form of taxes and fees from oil and gas activities in 2007, a decline of about DKK 3 billion compared to 2006. This decline is due to lower oil and gas production in 2007 than in 2006 and to the falling dollar exchange rate, which did not fully offset the oil price hike during the same period. The average quotation for a barrel of Brent crude oil was USD 72.5 in 2007. The state’s share of the oil companies’ profits came to 63 per cent in 2007.

The production of oil and gas in 2007 led to a decline in reserves. The DEA has assessed that Danish oil and gas reserves constituted 214 million m3 of oil and 105 billion Nm3 of gas at January 1, 2008. This is a decline of 11 and 13 per cent, respectively, compared to the assessment made at January 1, 2007.

Denmark continues to be a net exporter of energy. In 2007, the total production of oil, gas and renewable energy exceeded total energy consumption by 31 per cent. According to the report’s new 20-year forecast, Denmark will be self-sufficient in oil through the year 2017 and in natural gas through the year 2016.

The drilling of the Rau-1 well resulted in a new oil discovery in 2007. Interest in finding new oil and gas fields remained high, and three new exploration licenses were issued during the year. Sustained high oil prices provide an incentive for oil companies to invest in projects that will improve recovery from existing fields and make it viable to develop minor fields. This may extend the period during which Denmark’s production of oil exceeds consumption.

In 2007, the oil companies invested about DKK 0.5 billion in exploring for new oil and gas fields and about DKK 6.6 billion in developing existing oil and gas fields. Since 1963, they have invested a total of DKK 28 billion in exploration for oil and gas and a total of DKK 126 billion in the establishment of oil and gas production facilities (platforms, pipelines and wells).

The offshore accident frequency dropped to 3.6 per million working hours in 2007 from 4.9 per million working hours in 2006. This continues the downward trend started in 2002. Because of the limited number of accidents, the accident frequency may fluctuate widely from year to year. By comparison, the accident frequency for all Danish onshore industries was 11.2 per million working hours in 2006.