Danish oil is attracting attention as INEOS agrees to purchase Hess Corp’s stake in two oil fields within EU producer Denmark.
INEOS has agreed the purchase of U.S. oil firm Hess' subsidiary Hess Denmark at a value of $150 million and aims to boost Danish production prior to the country’s planned termination of its oil production by 2050.
INEOS Energy, which currently works in Denmark’s Siri field, will acquire the remaining 61.5 percent of the Hess-operated Syd Arne oilfield and a 4.8 percent stake in the Solsort oilfield.
In December 2020, Denmark announced it would ban new exploration and production of gas and oil in the North Sea from 2050. This comes after Norway announced similar energy objectives in 2020 in line with Paris Agreement expectations.
The government cancelled its anticipated eighth offshore licensing round and all future licensing rounds as part of the planned cessation of activities.
Denmark has held the title of the third-largest oil producing country in the EU for many years, following the U.K. and Norway, whose activities are also largely based around the North Sea. However, in 2018 it became a net importer of oil following a quarter of a century as a net exporter due to its shrinking oil reserves.
At its peak in 2004, Denmark produced 390,000 bpd oil equivalent but by 2020 average production dropped to around 70,000 bpd. This is partially due to the need to cease operations at Denmark’s largest oil field, the Tyra field, due to seabed subsidence. The redevelopment of the site has put operations on hold for the next two years, with output expected to rise again by 2025.
INEOS currently produces around 60,000 bpd oil equivalent, and its increased capacity potential a boost in production by 6,000 bpd. The company plans to tap into Denmark’s full oil potential before the national industry grinds to a halt within the next forty years.
INEOS chair Brian Gilvary explains, “It takes us from a position in Denmark where effectively we ran an end-game to a position now where we can grow out to the mid-2040s”.
In addition to traditional oil exploration and production, INEOS is also expected to develop its Greensands carbon storage project in Denmark. The idea is to capture and store carbon emissions from the oilfields to meet carbon-reduction aims in line with greener government policies. Carbon capture is becoming an increasingly popular form of carbon reduction as regulators put pressure on oil majors to adopt more environmentally friendly practices.
Using innovative technology, INEOS plans to store 8 million tonnes of carbon dioxide emissions under the basin every year starting from as early as 2025.
Hess is also expected to win from the deal, using the sale to invest heavily in its Guyana oil production. Partnering with Exxon Mobil, Hess has seen success in Guyana’s Stabroek Block with over a dozen oil discoveries.
The deal between INEOS and Hess is expected to be completed by the third quarter of 2021, with 60 employees transferring companies. This means INEOS can quickly start ramping up production to ensure it meets its pre-2050 peak targets.
By Felicity Bradstock for Oilprice.com
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