Perspectives for the Danish Sector of the North Sea. Challenges and opportunities ahead!

Transcription

1 Perspectives for the Danish Sector of the North Sea Challenges and opportunities ahead! Presentation Energinet.dk Offshore Forum 28 May 2014 July 30, 2015 page 1

2 Presentation agenda Oil Gas Denmark, brief presentation Perspectives for the Danish Sector of the North Sea Challenges and opportunities ahead! - Realization through three growth engines July 30, 2015

3 Presentation agenda Oil Gas Denmark, brief presentation Perspectives for the Danish Sector of the North Sea Challenges and opportunities ahead! - Realization through three growth engines July 30, 2015

4 Organisational basis DANISH OPERATORS Offshore Oil and Gas Operators in Denmark Service Companies Supplier companies Dong E&P HESS Mærsk Oil&Gas Noreco Wintershall ~total 50 members Shell Chevron Danoil Bayerngas Nordsø Fonden VNG PA Ressources TOTAL page 4

5 Geographical span On longer term the aim is to establish collaboration with Greenland and the Faroe Islands Source: Energistyrelsen page 5

6 Presentation agenda Oil Gas Denmark, brief presentation Perspectives for the Danish Sector of the North Sea Challenges and opportunities ahead! - Realization through three growth engines July 30, 2015

7 Challenge # 1 The oil is deposited i tiny pores in limestone with low permeability and low porosity Recovery rate average 28% page 7

8 Energy consumption in Denmark ( ) Share of total energy consumption in Denmark (per cent) 100% Change from '90 to '10 (percentage points) Change from '10 to '22 (percentage points) 90% 80% 43.3% 38.7% 40.4% Oil -4.6% 1.7% 70% 60% 50% 10.0% 20.6% 16.9% Gas 10.6% -3.7% 40% 30% 20% 10% 39.9% 18.1% 22.5% 14.7% 28.0% Coal Renewables -21.8% -3.4% 15.8% 5.5% 0% 6.8% Source: The Danish Energy Agency: "Danmarks olie- og gasproduktion 2010"

9 Actual production has exceeded most prognoses made by the Danish Energy Agency The Danish Energy Agency: "Historically, the Danish oil and gas sector has been innovative in improving their production methods to increase recovery rates and thus the total production is above the expectations of the energy agency" prognosis Actual production 2000 prognosis 1995 prognosis 1990 prognosis Deviation between actual forecasted production 2010 Volume (mmboe) Value (bndkk)* * Assuming an oil price of 79.5 USD/barrel; USD/DKK = 5.5. Source: The Danish Energy Agency

10 It is complex to drill at the Danish shelf and future well sizes are estimated to be amongst the smallest in NW Europe Well length and future field discovery size mmboe, metres, bubble size = remaining reserves 2011 Remaining reserves (mmboe**) Average total well length ( )* (metres) Denmark Norway Netherlands The U.K Average future field discovery (mmboe) *Average measured depth from the rotary table to the end of the well (TD) along the well bore. Figures include production, appraisal and exploration drillings from 2007 to 2011 **Commercial reserves as per Source: Norwegian Petroleum Directorate; The Rushmore Reviews; BP Statistical Review; IHS Global Window

11 The oil and gas sector is the largest governmental corporate income source in Denmark Corporate tax contributing industries in 2010 DKK billions 23.7 Additional tax* not included in DST data 16.4 The Danish Energy Agency estimates the total direct corporate tax contribution* from the oil and gas sector to be DKK 23.7 billion Financial and insurance Extraction of oil and gas Wholesale and retail trade TransportationPharmaceuticals Manufacture of furniture and other manufacturing Knowledgebased services Telecommunications Share of total (per cent) 17,0% 15,3% 10,8% 7,9% 5,3% 4,1% 2,9% 2,5% In 2010, for every 1 million barrels of oil equivalent produced, government revenues of DKK ~170 million were generated * In addition to ordinary corporate taxes, government revenues from the oil and gas sector includes carbon tax and profit-sharing Source: Statistics Denmark; the Danish Energy Agency

12 The indirect activities driven by the oil and gas sector create significant personal income tax revenues Direct and indirect sector personal tax DKK millions, average Indirect 3,200 2,500 Historical oil and gas sector direct and indirect personal income tax contribution Index, 100 = Direct employment ,400 1,200 1, CAPEX Indirect Direct Historical production and average salary cost per employee Index, 100 = 1992 OPEX Production volume CAGR '92-'10 (per cent) 5.4% 5.0% CAGR '92-'10 (per cent) Direct % 4.2% 3.1% Note: Direct and indirect figures are related to the Danish oil and gas sector Source: Statistics Denmark National accounts

13 Employees have significantly higher educational levels than the average Danish employee Highest completed educational level per employee comparison of the oil and gas sector to DK average employee, 2009 Per cent 32.4% 30.1% All Extraction of oil and gas 22.0% 23.0% 18.9% 20.2% 13.0% 14.6% 13.6% 7.1% 2.3% 1.0% 0.5% 1.3% Elementary school Upper secondary education Standardised basic training and apprentice levels Short-term higher education Medium-term higher education Long-term higher education 54% of employees within "Extraction of oil and gas" have completed a higher education compared to the national average of 35% PhD-level education Source: Statistics Denmark "Registerbaseret arbejdsstyrkestatistik"

14 Presentation agenda Oil Gas Denmark, brief presentation Perspectives for the Danish Sector of the North Sea Challenges and opportunities ahead! - Realization through three growth engines July 30, 2015

15 Potential Mmboe Technological Resources Exploration Resources Contingent Resources Gas Production Oil Production Source: Danish Energy Agency; Quartz+Co-analyse

16 Mmboe 1600 DKK 190 bn. in taxes pct. (1,4 bn. bbls) pct. Planlagt produktion ( ) Potentiale ( ) Kilde: Energistyrelsen; Quartz+Co-analyse DKK 190 bn. incremental tax payments if half of the potential is realised page 16

17 Production is decreasing Total yearly production and reserves Mmboe 200 Production Gross Change in Reserves % 100 Ø Source: Danish Energy Agency

18 Wells drilled in Denmark Total number of wells per year % Ø = 22 Ø = 19 Ø = 18 Ø = 35 Ø = 26 Ø = 12 Source: Danish Energy Agency

19 EXPLORATION

20 Exploration wells drilled in Denmark Exploration wells west of 6º 15 line Exploration wells east of 6º 15 line : Sole Concession and DUC 1967: First discovery 1981: Sole Concession amended 1983: Introduction of bidding rounds 1984: Bidding Round : Bidding Round : Bidding Round : Bidding Round : Bidding Round : Bidding Round Ø ies 1980 ies 1990 ies 2000 ies wells (2 per year in av.) 34 wells (3 per year in av.) 64 wells (6 per year in av.) 32 wells (3 per year in av.) 32 wells (3 per year in av.) 9 wells (2 per year in av.) Source: Danish Energy Agency; Nordsøfonden; Energi- og Olieforum

21 Average size of discoveries per decade Mmboe ies 00 ies 10 ies Source: Danish Energy Agency; Oil Gas Denmark

22 MARGINAL FIELDS

23 Development of discoveries Maersk Oil PA Resources DONG Energy Wintershall Amount and percentage Years since discovery Relinquished to DEA Size of discovery Adda 100% 51% 1 3% Elly Svane Amalie Gert Boje Ravn Alma 46% 10 Sofie Lille John 5 Rau Solsort Broder Tuck Discoveries Fields developed Ongoing developments Non developed discoveries 0 Sara Presently not commercial Luke Considerations ongoing Hibonite Development plan. Source: Danish Energy Agency; Wood Mackenzie; Olie Gas Danmark; Quartz+Co-analyse

24 Non developed discoveries Size of field Mmboe Tyra Skjold Dan Halfdan Siri Gorm Valdemar Roar Syd Arne Source: Danish Energy Agency; Olie Gas Danmark Harald Lime/stand alone Sandstone/stand-alone Tieback/limestone Tieback/sandstone Not developed Hejre Depth of reservoir Meter

25 Development of small discoveries 50mmboe or smaller: Development concept: 33% 100% 71% 19% % 13 14% 1 14% 1 Norway UK Denmark Tieback Unmanned platforms Subsea installations Stand alone Kilde: Wood Mackenzie; Maersk Oil; DONG Energy; HESS

26 Lead time up to 50 MMBOE Exploration license Field Development 5 7 Production start up Total years Lead time Life time of field Expected remaining life time for existing infrastructure Svend Siri Nini Cecilie Lulita Kraka Roar Gorm Skjold Harald Valdemar Syd Arne Dan Halfdan Tyra Financial cut off < 14 years Financial cut off > 14 years Source: Danish Energy Agency; Wood Mackenzie; Olie Gas Danmark

27 RECOVERY RATE

28 Recovery Rate on field basis Tyra + Tyra SE Syd Arne Valdemar -531 Skjold Roar -134 Rolf Svend Siri -80 Regnar -56 Harald -50 Dagmar -24 Lulita Nini Cecilie Halfdan Dan Gorm Kraka Hejre Remaining oil (volume) following planned end of production Produced oil (volume) from start of production until 2012 Remaining potential at present recovery rate STOIIP Recovery Rate 8% 12% 12% 12% 19% 9% 21% 16% 37% 36% 30% 40% 30% 32% 51% 45% 47% 37% 51% Average 28% Source: Danish Energy Agency; Maersk Oil; DONG Energy; HESS; Quartz+Co-analysis

29 UNLOCKING POTENTIAL

30 Self sufficiency Mmboe Technological Resources Exploration Resources Conditional Resources Gas Production Oil Production Demand Source: Danish Energy Agency

31 Key messages Huge potential in the Danish Sector of the North Sea Realization of potential requires massive investments Need for stable and incentivising framing conditions Focus on enhanced exploration, production of marginal fields, increase of recovery rate Climate and Energy Minister has committed to initiate collaboration in respect of a Long Term Strategy for realization of the potential in Denmark

32 Growth Engine I Exploration Following years of successful exploration, the number of licenses have decreased in DKCS and number of exploration wells is relatively low. Discoveries are forthwith made in DKCS, however, the discoveries are increasingly getting more marginal and costs are increasing a.o. because of scarce rig availability. Should the exploration resource be realised more exploration wells need to be drilled. This could happen if applying e.g.: Differentiated incentives encouraging exploration A more agile licensing structure Harmonisation of regulation with other EU countries Encouragement of developing marginal discoveries

33 Growth Engine II Production of Marginal Fields Almost half of all discoveries on DKCS have not been developed. Marginal discoveries represent a significant resource for Denmark, however, due to size and increase in development costs development need tie back to existing infrastructure. Tie back can be a challenge in spite of good opportunities for tie back, including legal basis for same. Development of marginal fields include significant economical uncertainty. Therefore marginal fields are suffering when competing for capital in the oil companies investment portfolios.

34 Growth Engine II Production of Marginal Fields There is a significant risk that vital parts of the existing infrastructure in DKCS will be decommissioned due to economic reasons. This will reduce the time window for tie back of marginal discoveries. In so far marginal discoveries should be tied back to existing infrastructure in the years to come, then the total planning period must be reduced. Moreover, the economic uncertainty needs to be reduced e.g. by establishing an incentive structure. Simultaneously, it should be made attractive to invest in producing fields tail-end production and thereby extending the lifetime of existing fields and the window for tie back of marginal fields.

35 Growth Engine III Recovery Rate DKCS operators have continuously increased the recovery rate. Today an average recovery rate of 28% is expected in DKCS. For each percentage point increase of the recovery rate achieved, a significant value for the operators and the Danish society is gained. The limited size of the fields and the geological conditions of the Danish subsoil makes a further increase of the recovery rate difficult. The recovery rate of the DKCS lime stone is significantly lower than that of sand stone.

36 Growth Engine III Recovery Rate In order to further increase the recovery rate the following will be needed: Increase number of productions- and water injection wells Extend conventional water injection to more fields Establish a comprehensive plan for commercial use of CO2-injection on relevant DKCS fields Intensify general research in respect of secondary and tertiary recovery techniques Establishing incentives structures.

37 What is required to realize the potential? Incentives Enhanced Operator Collaboration Costs Incentives Regulatory adaption Source: Quartz+Co-analysis page 37

38 Further information Martin Peter Næsby Managing Director Mobile Esben Mortensen Head of Secretariat Mobile Please visit web site Ulla Lena Head of Communication Mobile Dorthe Heedegaard Office Manager Mobile Thank you! page 38