Global Traditional Energy Resources
The Scandinavian Alum Shale underlies large portions of Sweden, Denmark, and potentially Norway. However, a majority of the Alum Shale is “shallow, thin, and immature.” The Alum Shale is normally pressured and is characterized by moderately high clay content and structural complexity, making it a “high risk play.” The Energy Information Administration estimates that the Alum Shale formation contains 158.6 trillion cubic feet (Tcf) risked shale gas in place, with 31.7 Tcf as the risked, technically recoverable shale gas in Denmark.
USEIA Report at XIII-37.
Denmark imposed a moratorium on fracking in 2012, but the licenses issued prior to the ban remained valid. Licensing activity began in Denmark as early as 2010. French firm Total had been the most active operator in the country. It began drilling at Denmark’s first shale exploration project in May 2015 in northern Denmark, and some news outlets reported that Denmark’s government would reevaluate its moratorium on fracking following the results of that project. However, in August of 2015, Total announced that it was pulling out of its exploration project after failing to discover adequate deposits. Following Total’s announcement, Energy and Climate Minister Lars Christian Lilleholt stated that “[a] temporary stop to new applications for shale gas has been implemented and that will continue to apply. That means that new applicants as of now cannot receive permission for new shale gas drilling.” Total’s exploration license runs through June 2016, and the company has stated that it is considering further exploration activities in northern Denmark.
Aside from the continuing moratorium on new licenses, shale gas development in Denmark faces additional hurdles. In addition to already having access to conventional hydrocarbon resources in the North Sea, Denmark, just as its Nordic neighbors, is also focused on developing renewable energy. The Danish government’s long-term objective is that Denmark should be independent of fossil fuels. Denmark is already particularly strong in wind power; in 2015, 42% of the country’s electricity supply came from wind power. In addition, another recent study concluded that Denmark could meet 85% of its electricity demands with renewable sources by 2030 and 100% by 2050 (63% from wind, 22% from biomass, 9% from solar PV).
Additionally, Denmark has seen significant anti-fracking activities, led in part by organizations such as Greenpeace and the Danish Society of Nature Conservation. As Total mobilized equipment at its exploratory project in northern Denmark in 2015, protestors set up camp on-site and blockaded roads leading to the project site for several hours at a time. About 20 of those protestors eventually crossed barriers and came onto the project site, where four protestors proceeded to climb to the top of the 45-meter tall boring machine. Following the shutdown of Total’s exploratory project, a Greenpeace spokesperson said, “It has always been a crazy idea that Denmark, as a densely populated country with an ambitious groundwater protection programme, should be subjected to shale gas production.”
Statutory and Regulatory Framework
The Danish Energy Agency (DEA), established in 1976, is a government body under the Danish Ministry of Energy, Utilities and Climate. The DEA’s primary functions include administering “energy legislation for power and heating supply, renewable energy, and exploration for and production of oil and natural gas.” In addition to DEA’s oversight of the oil and gas sector, the exploration and production activities of licensees are subject to approval from other Danish authorities, including the Danish Environmental Protection Agency. Environmental regulations and the approval procedures for oil spill contingency plans are among the issues that operators should consider.
The relevant legislation for oil and gas activities is the Act No. 293 of 10 June 1981, as revised by Consolidated Act No. 960 of 13 September 2011 on the Use of the Danish Subsoil (the “Subsoil Act”). The Subsoil Act lays down the “basic framework” for oil and gas exploration and production in Denmark. The Act sets forth “general terms” and contemplates “adaptations and more detailed regulations.” Order No. 1132 entered into force on December 5, 2011, to implement the Subsoil Act. Among other things, this order governs agreements for access to property for exploration and production.
Taxation of all types of income in connection with investigations, exploration and recovery of hydrocarbons and activities related thereto is governed by Consolidation Act No. 971 of 20 September 2011, as amended by section 7 of Act No. 591 of 18 June 2012, section 6 of Act No. 792 of 28 June 2013, and section 1 of Act No. 1636 of 26 December 2013 (the “Hydrocarbon Tax Act”).
Last updated September 2016.