Celebrating 50 years as an oil-producing nation: The adventure could continue for many more years

It all began in 1966. Back then, DUC (Dansk Undergrunds Consortium) found the first traces of oil in the Danish sector of the North Sea. The industry quickly evolved into what would become Denmark’s oil boom, a bonanza generating large flows of tax revenue and leaving a substantial footprint in Esbjerg, which became the hub for Danish offshore activities.

“The offshore oil and gas industry has definitely had a huge impact on the Port of Esbjerg and the city’s business community. In Esbjerg alone, we’re talking about several hundred businesses, as many as ten thousand employees and revenue of some ten billion Danish kroner at the height of the boom,” explains Morten Hahn-Pedersen, historian and former director of the Fisheries and Maritime Museum in Esbjerg.

Although it may be hard to believe, it has been only 50 years since the first oil was pumped ashore from a Danish oil field. The industry evolved incredibly fast, according to Bo Cerup-Simonsen, director of the Danish Hydrocarbon Research and Technology Centre at the Technical University of Denmark:

“The Danish oil industry started from scratch. From a technological perspective, it’s interesting to see that you can start at greenfield level and build enough skills in the domestic market to start up production. During the past fifty years, the Danish oil industry has reached a highly advanced level, creating immense value for the country.”

Challenges and development

In many ways, the story of the Danish oil industry is one of huge success despite very difficult conditions.

“I don’t think the national politicians in parliament or the local politicians in Esbjerg had any idea at all about what this would lead to,” says Morten Hahn-Pedersen.

“In other places, all you have to do is drill a hole a few hundred meters deep, and the oil more or less comes gushing out of the ground. It’s certainly not like that in Denmark,” explains Bo Cerup-Simonsen.

Denmark’s oil lies deep beneath the sea floor in dense limestone layers. Solving the resulting challenges requires extensive knowledge and advanced technology. He explains:

“At first, the general perception was that oil could not be produced from the Danish underground. The general belief was that it was possible to recover five percent of the oil, but thanks to various technological advances, the industry now expects to recover about 28 percent.”

This achievement has only been possible due to ongoing innovation and development. Bo Cerup-Simonsen says that this is a trend that, preferably, continues to evolve so an even higher recovery rate can be achieved.

Good reason for optimism

However, the oil industry is facing challenges. The price of oil is below USD 50, and there is a distinct need to lower costs and raise productivity. In addition, the Danish Energy Agency recently lowered its projection for the industry, estimating that, as early as 2047, oil will no longer be produced from the Danish part of the North Sea.

Nevertheless, there is a reason to be optimistic, says Bo Cerup-Simonsen:

"Very often, it’s when you come under pressure that you come up with new solutions. I believe the drive for efficiency we’ve seen in the industry will continue and there will be a race for innovation that will intensify as well.”

History shows that challenges lead to development, as Morten Hahn-Pedersen confirms:

“There have been many crises over the years. Even though the industry has kept on developing the technology and cost-cutting and other measures have been a key industry focus, all of these factors have been boosted considerably every time there has been a crisis."

“There are so many highly skilled people in this industry. I believe that we will see new exciting solutions over the next ten years that will raise the potential for increasing the production of oil and gas in Denmark,” adds Bo Cerup-Simonsen.

He mentions three areas that are crucial for developing the oil industry of the future: broad collaboration, technology and talent.

Collaboration leads to innovation

One of the prerequisites for the survival of the Danish oil industry is a strong and efficient collaboration between the Danish government, operators and sub-contractors.

“A smooth working relationship between these three groupings could be highly innovative. There are already discussions and fora where people are working to find ways of moving forward and realising new potential. Our research centre plays an important role in providing a venue where stakeholders can meet and create new solutions,” explains Bo Cerup-Simonsen.

“One of our basic functions is to help define the problems for anyone who might have an interest in developing products and services. Hopefully, that can help stimulate idea generation,” he says.

“Secondly, it’s important to establish a dialogue between the regulatory authorities, the operators and the sub-contractors about how we can take ideas for new solutions and turn them into reality. At some point, ideas will have to be tested large scale at sea, and for that it’s important to determine who will take the risk and who will reap the rewards.”

The technology is out there

This is where another prerequisite comes in: new efficiency-enhancing technology, something Bo Cerup-Simonsen is also optimistic about. He believes the solutions are out there: for example, through new sensor technologies or new methods for chemical analysis of underground deposits.

The challenge, therefore, is to bridge the gap between new research and the North Sea oil industry.

“There is so much happening right now in scientific research, so, as far as I can see, there are bound to be some new technologies in the scientific community or among the sub-contractors that aren’t fully developed yet but can be matured over the next few years to help us increase the production of oil and gas from the North Sea,” he says.

Attracting young talent to the industry

Lastly, there is a third prerequisite for a continuation of the Danish oil boom: the industry needs to have access to a talented workforce with the right skills.

“It's a matter of ensuring that, going forward, there are competent people in Denmark with the requisite skills. For that, we need an educational system that supports the needs of the North Sea oil industry,” says Bo Cerup-Simonsen.

But it is also a matter of the industry being able to attract talent:

“Attracting the best talent and bringing highly skilled people to the industry will be crucial. The industry has to appeal to young people and make them want to pursue a career there,” says Bo Cerup-Simonsen.

He believes this also means it is necessary to work on the general image of the oil industry.

“It has to be a legitimate industry that doesn’t clash with the transition towards a greener economy. On the contrary, it has to be perceived as being part of the transition, so young people will want to work in the industry because it makes sense to them.”

If all these efforts are successful, and the right framework conditions are in place, it would not be implausible for the oil industry to continue for another 50 years, according to both Bo Cerup-Simonsen and Morten Hahn-Pedersen.

This is a translation of the Danish article published in Port of Esbjerg Magazine 3, 2016.