Denmark to end offshore oil and gas E&P by 2050

The Danish government has announced that it plans to end all oil and gas exploration and production in the Danish sector of the North Sea by 2050 and is to cancel its latest licensing round.

Denmark announced ambitious climate targets last year, aiming to reduce emissions by 70% by 2030 and achieving carbon neutrality in 2050.

Commenting on the news, Michael Lazarus, Director of the Stockholm Environment Institute’s (SEI) US Centre and a lead author of the Production Gap Report, says: ‘This announcement is an encouraging sign, showing how governments can better align policies on oil and gas production with their own climate ambition. As emphasised in this year’s Production Gap Report, wealthier countries need to take the lead in winding down fossil fuel production at the pace needed to avoid catastrophic climate disruption.’

Published in early December, the 2020 special issue of the Production Gap Report – produced by SEI, the International Institute for Sustainable Development (IISD), the Overseas Development Institute (ODI), E3G and the UN Environment Programme (UNEP) – found that global fossil fuel production needs to decline by 6% per year, starting now, in order to limit global warming to 1.5°C.

The report states that between 2020 and 2030, global coal, oil, and gas production would have to decline annually by 11%, 4%, and 3%, respectively, to be consistent with a 1.5°C pathway. But government plans and projections indicate an average 2% annual increase for each fuel, it says. This translates to a production gap similar to that estimated in the 2019 report, with countries aiming to produce 120% and 50% more fossil fuels by 2030 than would be consistent with limiting global warming to 1.5°C or 2°C, respectively, according to the latest study.

The report lays out six actions policymakers can take to wind down fossil fuel production, including introducing restrictions on fossil fuel activities and infrastructure; reducing existing government support for fossil fuels; and providing ‘local and international support to fossil-fuel-dependent communities and economies for diversification and just, equitable transitions’.

Meanwhile, Daniel Rogers, Oil and Gas Analyst at GlobalData, notes that Denmark’s announcement follows in the footsteps of other decarbonising countries that have or plan to implement bans on domestic petroleum exploration such as Ireland, Italy and New Zealand. With the energy transition gathering pace in some regions, he thinks it is highly likely that others will follow.

‘This is the final blow for Danish hydrocarbon exploration, which was in need of revival,’ he says. ‘The last hydrocarbon discovery in Denmark was made over five years ago and since then, little success has been met by the limited drilling activity in the country. The Jill-1 well drilled last year by Hess in the Danish offshore, followed a five-year exploration drilling hiatus but failed to find commercial hydrocarbons.’ He continues: ‘There is still upside in existing Danish oil and gas fields, as Total and partners (Danish Underground Consortium) continue to invest in the Tyra and Halfdan areas. However, COVID-19 related delays to the restart of the Tyra oil and gas facilities deal a further blow to Danish hydrocarbon production in the near term. As domestic gas production declines and the Tyra hub remains offline, imported gas volumes to Denmark have accelerated and 2020 has seen a rise in imported gas so far. After many years of being a net exporter, Denmark has recently become a net importer of oil and gas.’

‘These plans build on a more regional movement towards lower carbon energy that has been growing across Europe. It will be interesting to see if this decision, as well as others made or under review by surrounding countries, will also have an impact on the neighbouring UK, which recently announced that it was planning to review its oil and gas licensing round process in the context of achieving net zero emissions by 2050.’