New North Sea agreement is in place
Maersk Oil and its partners in DUC can now cancel the closure of the Tyra field and instead embark on the reconstruction of the old field. It was established today after the government has reached an agreement with S, DF, SF and RV, which ensures lower taxes on oil and gas from the North Sea.
The agreement means that Maersk Oil and its partners in DUC can now begin to invest the double-digit billion amount, which the reconstruction of the Tyra field is expected to cost.
The concessions agreed are calculated in a note from the Ministry of Finance for a total of 5 billion kr. up to and including 2025. These concessions are primarily obtained through an increase in hydrocarbon deduction and an increase in the so-called balance depreciation rate.
Funding was obtained by drawing dividends from the Growth Fund and the Danish Export Credit and to outphase VAT system, according to the memo.
The agreement ensures that the Treasury, according to the Ministry of Finance will have revenues of up to 26 billion kr. up to 2042, while the large number of jobs linked to the extraction can be maintained.
"It has been crucial for the government that the new North Sea agreement ensures that we have a new infrastructure and will retrieve the remaining resources in the North Sea,” says Finance Minister Kristian Jensen, on the Ministry of Finance website:
"There is a need for extensive investments - in the reconstruction of the Tyra platform - and we have therefore decided to temporarily reduce the tax to make it attractive for private firms to pursue oil and gas extraction in the coming years. The alternative is that the state miss out on potentially huge incomes, and that the industry may have to close down local jobs.
To encourage investment in oil extraction in the North Sea, taxes on oil and gas exploration have been lowered in a window from 2017 to 2025. The agreement ensures, that if the oil price increases, which the state expects,repayment of the tax rebate will ensue. The state bases its expectations for oil prices on commodities such as forecasts from the International Energy Agency IEA," the statement says.
Maersk Oil states also welcomed the agreement and said in a press release:
"The agreement transforms the Danish part of the North Sea into a more competitive investment area for oil and gas companies to invest in and develop new opportunities," says Maersk Oil's COO, Martin Rune Pedersen and continues:
"A reconstruction of Tyra can be a catalyst to extend the life of the Danish part of the North Sea. It can protect valuable revenue to the Danish government and Danish jobs, not least in Esbjerg area. "
Today, on behalf of all partners in DUC, Maersk Oil has informed the market that production from Tyra is expected to be shut down in December 2019 after which the reconstruction work will start with a goal of being able to restart mining again in March 2022. The final schedule is subject to final approval of the investment plan, the company said in the press release.
Source: The editors of Maritime Denmark