Danish delays, low prices hit Nordsofonden hard

Danish state producer Nordsofonden had a difficult 2020, thanks to COVID-19. Low oil and gas prices compounded the pain of a year delay in the return of its major asset, the Tyra gas field, it said May 6. It is not now due back on line until half way through 2023. 

Nordsofonden's oil and gas production in 2020 amounted to 4.3mn barrels of oil, down 27% on 2019; and 2.5mn MWh of gas, less than half the figure for 2019.

However, despite that, it made a profit of Dkr 125 ($20.3)mn, compared with 2019's Dkr 565mn. The company's exploration activities suffered from the effects of postponements and cancellations on account of the drop in oil prices. "Over the past year, we and our partners in the upstream group DUC succeeded in achieving a number of milestones in the redevelopment of the Tyra field – in spite of the pandemic and its consequences. A large part of the Tyra installations was removed during the summer, and two new jackets were installed in the autumn," said CEO Birgitta Jacobsen.

Nordsofonden, which like Petoro in Norway represents the state's upstream interests, invested a total of Dkr 830mn in 2020, of which all but Dkr 30mn was devoted to the DUC's redevelopment of the Tyra field facilities. "On account of the major investments and decommissioning costs associated with the Tyra field, no dividend was paid to the Danish state in 2020; rather, Nordsofonden took out state loans in the amount of Dkr 500mn to finance the redevelopment work. It paid Dkr 263mn in hydrocarbon taxes."

Once the Tyra field facilities have been recommissioned, they will play a key role in securing Denmark's gas supplies for many years and generate income, however.

While the decrease in gas production is primarily attributable to the temporary closure of the Tyra field facilities, the dip in oil produced also reflects the natural decline in yield from the fields. The Tyra field was closed late in 2019, and production of oil and – particularly – gas will be affected until the new installations come on stream, it said.

Denmark also decided to forgo oil and gas production growth late last year with a new agreement for the next 30 years. This gives certainty that the existing activities can continue and that the North Sea resources can still be used. Even though the green transition is well under way in Denmark, the country will continue to need oil and gas for decades to come, it said.

Within the broad agreement, funds have been earmarked for investigating the possibilities for carbon capture and storage and electrifying Danish oil and gas production. "We see great potential in CCS technology, although implementing this technology remains financially challenging. We are also working closely with our partners in the DUC to develop energy-efficient solutions such as the electrification of North Sea installations," it said.