with Martin Næsby, Managing Director, Oil Gas Denmark
Oil Gas Denmark is a new organization with big ambitions. Would you begin by briefly introducing the organization to our readers?
Oil Gas Denmark was indeed established out of two organizations: Danish Operators and Danish Offshore Industry. Prior to our foundation in 2012, discussions had been ongoing for years to have a united industry representation.
One year ago the members of Danish Operators (at the time DONG, Maersk, Hess, Noreco, and Wintershall) came to agree that the challenges that the industry faced could better be resolved in broad collaboration across the industry.
Therefore two things were decided: firstly to reach out to the suppliers, organized in Danish Offshore Industry, and invite them to establish an umbrella organization.
And secondly, to establish an organization with two legs: one consisting of the operators, the other of the supplier companies. Danish Operators would include partners in the Danish Underground Consortium (DUC), license holders and other partners.
In brief, our association was established because: within the industry there was an urge to establish Denmark more firmly on the world map; we needed to lead an alignment with other European countries; to have an organization representing all of the service industry and the oil companies; and to have a joint interface vis-à-vis the authorities, by whom we have been warmly welcomed.
Why was it necessary to unite the two exactly last year and how much better is the organization now able to serve the interest of the sector?
I had been working for Maersk in Kazakhstan and Qatar for many years, so I was following the developments from a distance. Looking at it from my perspective abroad, the reason that the industry did not decide to unite earlier is that it took time for all the different players to fully understand how much more effectively the challenges that the industry faces are resolved in collaboration.
What have been the key milestones & achievements so far?
On May 1, 2012 Oil Gas Denmark opened its offices. I stepped down from my function as head of legal and corporate affairsand project manager at Maersk and started as managing director of the new organization. In June we launched a report prepared by Quartz+Co., which outlined the potential and perspectives of the oil & gas industry in Denmark.
The report was very well received by the different stakeholders, also as the oil & gas industry in Denmark did not have one unified voice that was really heard in the country, and the report was the product of our first united effort.
We then officially launched the organization with a reception on August 23 at which Minister for Climate, Energy and Building Martin Lidegaard expressed his support for our organization.
I am also happy to say that today we have welcomed all the major oil companies active in Denmark as members, including Nordsofonden, the Danish state oil and gas company. Indeed, recently Total signed up as a member. Currently we are in the phase of further expansion.
Looking ahead, a period of consolidation will follow during which we streamline and adapt the organizational structure. Remember, we are still in the process of uniting two organizations in one.
Would you outline the key priorities on your agenda today?
The key aim of the organization is to create more value for society and for the industry. Value creation can mean many things: knowledge management, tax revenues, etc.
Oil Gas Denmark is a lean secretariat. The idea is to have a number of workgroups populated by our members, with Oil Gas Denmark in a coordinating role.
We are upstream, we are oil & gas, and we are representing the whole sector. It is our ambitionto be the trusted voice of the industry; to promote understanding and recognition of the industry; to develop sector views; to optimize business opportunities; and to work for health, safety and environment.
We will deliver our ambitions through our four core areas. The first core area is Sector Development, which includes framing conditions, or the importance of having stable conditions to enable long-term decisions that are necessary to realize the potential of the North Sea and the Danish onshore subsoil. An example is pursuing innovation and development of technology and to understand what subject matters can best be handled by an organization rather than by the companies themselves.
Our second core area is Health, Safety and Environment. The Danish oil & gas industry has a good track record in this regard and sharing it between companies and with other oil-producing North Sea countries will have high priority. But there is still room for improvement.
The third is Skills & Capabilities, which focuses on how we can attract and retain talent in the industry, and as part of this we look at how we can improve the image of the industry in society.
Last but not least we focus on the continued development of the service companies that supply the oil industry. Internationalization is also part of this: Danish service companies that have matured in the Danish sector of the North Sea are now applying for projects in Brazil or Norway, and Oil Gas Denmark looks into how we can help them.
The services we will be delivering are among other research and publications, partnerships, networking events, training and communication.
Communication is quite important since the knowledge level of the Danish population on the national oil & gas industry and its contributions is not very high. However, the industry is partly to blame for that, we have not been vocal enough so far.
Hence, the more momentum we gain, the more we generate value for our members, and the more success the Danish oil and gas industry will have.
We came to Denmark as we want to present our readers with a picture of what the last decades of Europe’s third largest oil & gas producer will look like, and the potential that it offers today. With the 7th licensing round coming up, would you present the international oil industry with a picture of the potential that you see?
The current recovery rate is around 26-27 percent, which is low in comparison with other producers such as Norway. We should consider, however, that it went up from 5-6 percent on the outset, and seen in that light it actually is a great achievement.
History shows us that just since the 1990s we have reached a twelve percent increase in recovery rates. We think that in the next ten years we may see another 10 percent increase. Some universities even talk about reaching a 50 percent recovery rate. I do not know whether we can make that, but records show without a doubt that we can increase the recovery rate. The oil companies believe that we can do it, as well as universities and scientists believe that we can do it.
And there are good reasons to do it: with every increase of one percent of the extraction rate, there is a gross value of the oil of more than 50 billion Danish crowns. That is one of our key message and it was our key message to the minister when we met him mid-January.
Furthermore, demand for oil is unlikely to falter. There is an expectation that renewables will replace demand for coal, but looking forward the demand for oil and gas is pretty stable. Denmark as well going forward will need oil & gas, and it makes much more sense to produce it ourselves than to import it.
More than 70 percent of the commercial reserves have been produced. We are forty percent down from the production peak in 2004. But, as said earlier, our organization and our members think that there is significant potential left in the Danish North Sea, but it requires new technologies, CO2 injection, stable framing conditions, and massive investments to fully exploit the potential. That is why Oil Gas Denmark has come to life: to explain the necessity of stable framing conditions, to talk about the people we need to realize the potential, etc.
Would you outline the importance of the Danish oil & gas industry to Denmark?
Denmark is an oil & gas nation, but too few people know it. However, people are in general realizing that we are a needed industry. They may not love us, but they increasingly understand that we are necessary.
Denmark is producing 0.3 percent of the world’s oil, and it generates significant tax revenues for the government. The contribution of the Danish oil & gas industry in taxes was around 24 billion Danish crowns in 2010, which is far above any other sector in Denmark. By 2011 tax incomes soared to 30 billion, mostly because of the increase in the oil & gas price.
We represent 15.000 work places, 48 billion crowns or 9 percent of Danish exports, and a great deal of innovation. In the next five years, the expectation is that 44 billion Danish Crowns will be invested in the Danish oil & gas industry.
Denmark applied to host the World Petroleum Council in 2017, which could mean an extra boost for the recognition and image of Denmark as an oil & gas nation, both at home and internationally.
We just arrived in Denmark but indeed feel that the attention that the industry receives from society and politics does not match its size and importance. Where is the disconnect?
Danes like to think that we are a knowledge country. One of Oil Gas Denmark’s messages is that we are an oil & gas country, and that this does not contradict with the idea of Denmark as a knowledge country. On the contrary: the average education of a person employed in the oil & gas industry is higher than the country average, because the industry is a high tech one.
We do not see the oil & gas industry as opposing Denmark’s green agenda, on the contrary, we can complement it. What do you do when there is no wind? You turn on the gas turbines. Also, there are many examples of shared technology between offshore wind and offshore oil & gas. It is not a question of ‘either’ – ‘or’ but rather of ‘both- ‘and’.
Do you feel that the Danish educational system is delivering the right talent to fuel the desired prosperous future of the Danish oil & gas industry?
The oil & gas industry requires a large number of highly skilled people. The numbers that the industry requires are not delivered by the Danish educational system. Therefore it is necessary to contract people from abroad, to educate the existing workforce further, and to collaborate within the industry to make sure something is happening. That is whySkills & Capabilities is one of Oil Gas Denmark’s focus areas. We feel that there has not been enough focus on this in the past.
The Ministry of Science invited us to participate in a workgroup that will map out the need for competences specifically in the offshore industry. We had our first meeting in February 2013. This shows that both industry and political circles realize that something needs to be done.
Our view is that it is a shared responsibility. We support collaborating in an effort to fix it, but we also have our own responsibility in talking about the industry and the fantastic career opportunities that it offers.
The Oil & Gas industry is no longer just hard labor for men, soaked in oil on a rig , it is also about high-tech, well-paid careers in a very exciting industry that offers many opportunities to work abroad.
What can the rest of the world learn from the Danish oil & gas industry?
We never had easy oil in Denmark. Many of our reserves lie in mature chalk. If you take a bath tub and fill it up with water and put in a block of chalk from the Danish sector of the North Sea, it would take thirty years for the water to come out. If you take the same bathtub and water and take a block from the sand reservoir from the Norwegian sector of the North Sea, it will take 14 days. That tells you a bit about the massive challenges that we are facing in Denmark.
Despite that, we are a net exporter of oil and gas.. What is then the competitive edge of Denmark? It is our innovation and cost-efficiency.
We have to drill long wells to reach our reservoirs, and these wells will only grow longer, which requires new technologies. That is one of the challenges that the industry has faced and is facing today: how can existing technologies be used in an extended, ultra-long horizontal well. From a global perspective, Denmark is a frontrunner in this technology. We did not invent it, but we most certainly refined it.
Mærsk Oil for instance applied this expertise in Qatar’s Al-Shaheen field. Al-Shaheen is a very thin oilfield that had been drilled through by the majors, and none of them found the field suitable to commercialize. Mærsk Oil, by applying the ultra-long horizontal wells technology it had gathered in the North Sea, was able to commercialize the field. Today it produces 300.000 barrels of oil from reservoirs similar to the ones here.
Would you say the opportunities in Denmark are most suitable for Independent junior players?
There is currently no major oil company active as an operator in Denmark. There are opportunities out here, but it takes the right size of Oil Company to do the job.
What would be your final message to our readers?
There is big potential in the Danish section of the North Sea, but it requires big investments. We have an excellent track record on innovation and on cost-consciousness.
On a personal note, what convinced you to leave your job at Mærsk to take on a totally different challenge as the managing director of this new organization?
For me personally building up an organization or projects is the most exciting part. As head of legal and corporate affairs I experienced similar challenges with Maersk in both Kazakhstan and Qatar, where I helped build up the company’s presence in Almaty from the ground, and was part of senior management team in Doha implementing the USD 6 billion Field Development Plan. Such situations are great challenges and a lot of fun.