Danish government presents new North Sea oil agreement – The Post

Danish government presents new North Sea oil agreement

Billions to be invested into bolstering the worn-out Tyra field

Billions for Tyra (photo: Stan Shebs)
March 23rd, 2017 11:57 am| by Christian W

The government, in collaboration with the parties Socialdemokratiet, Dansk Folkeparti, Socialistisk Folkeparti and Radikale, has unveiled a fully-financed agreement designed to ensure a future for oil production in the North Sea.

The agreement supports a two-figure billion kroner amount to be invested in oil and gas extraction in the North Sea by, among other things, completely re-building the ageing Tyra fields. The investments will allow for the possibility to generate up to 26 billion kroner for the state coffers looking ahead to 2042.

“It’s in Denmark’s interest to continue oil and gas production in the North Sea in order to maintain our supply security and independence from energy from unstable areas of the world,” said Lars Christian Lilleholt, the energy and climate minister.

“The government has set an ambitious goal to make Denmark independent of fossil fuels by 2050 and for at least 50 percent of our energy needs to be covered by sustainable energy by 2030. That demands great investment in the coming decades, and the income from the North Sea will play an important role.”

READ MORE: Danish oil production decreases yet again

DUC and cover
In order to promote investment in oil and gas production in the North Sea, the government has decided to reduce the tax on oil and gas production from 2017-2025. But should the price of oil increase, as is expected by the state, then the oil companies will pay back the tax rebate.

The government has also reached an agreement with the Danish Underground Consortium (DUC) concerning the full reconstruction of the Tyra field. DUC will support a number of initiatives aimed at improving the infrastructure and making it more attractive to develop smaller oil fields in the North Sea.

Danish oil production in the North Sea has stagnated in recent years to the point where it’s at the same level it was in 1992.

 

A rundown of the agreement:


– DUC will undertake a full renovation of the Tyra field in the North Sea

– the renovation will allow the extraction of an expected 129 million barrels of oil

– access to the infrastructure in the Danish part of the North Sea by third parties will be improved

– a pool of 100 million kroner for green initiatives in relation to oil and gas extraction will be established

– an improved investment window of 2017-2015 will be established where the framework will include:

* raising the hydrocarbon rebate over a six-year period from 5 percent to 6.5 percent annually

* raising the rate for balance depreciation on hydrocarbon tax from 15 to 20 percent

* the deduction point for the two aforementioned rebates will be changed from the time when investments go into service until the point of payment

* if oil prices increase to at least 75 dollars per barrel, as expected by the state, companies must start paying back the tax rebate

* the temporary tax rebate means less revenue for the state. This is funded by the introduction of proceeds from the Danish Growth Fund and Denmark’s Export Credit Agency and by the abolition of the advanced VAT scheme