The Danish government aims to revise a North Sea oil concession granted to operator A.P. Moller-Maersk with the goal of increasing state revenues from oil and gas production, energy officials said on Wednesday, Reuters reports. As a first step in the process, the government will carry out a review of petroleum taxation, the ministry of climate, energy and building said in a statement.
"We will see if we can find a new balance so that producers get more incentive to invest in increased oil and gas production, while at the same time they and the state get larger revenues from this activity in the North Sea," Climate, Energy and Building Minister Martin Lidegaard told Reuters.
The oil recovery rate in the Danish sector of the North Sea is about 24 percent, and every increase of one percentage point in that rate boosts revenues by 60 billion Danish crowns ($10.9 billion), according to the Danish Energy Agency.
"The government wants society to get the biggest possible dividend from oil and gas resources," the ministry of climate, energy and building said in a statement. "But at the same time, conditions should be competitive so that there will continue to be interest in investing here in Denmark."
In 2003, the government extended the Maersk group's concession to July 2042.
Under that deal, oil taxes rose for the remainder of a concession period expiring in 2012 and the government got a one-fifth stake from next year in the Maersk-led Danish Underground Consortium (DUC), which produces most of Denmark's oil and gas.
Maersk is operator and owns 39 percent of DUC. Royal Dutch Shell has 46 percent and Chevron a 15 percent stake in the partnership.
Lidegaard said conditions have changed since the previous centre-right government made the deal with Maersk in 2003.
"Since 2003 the oil price has more than quadrupled the level that was assumed when the agreement was made," he said. "However the corporate tax has been reduced several times which means lower taxes from the North Sea than was assumed in 2003."
The ministry said any eventual changes in the terms of the North Sea agreement would take place within the framework of the existing agreement or by way of a new negotiated deal.
It said the review would look into the consequences of the North Sea concession in light of the rise in the oil price.
The first reports that the government would seek to adjust the concession came on Tuesday evening.
Shares in A.P. Moller-Maersk closed nearly flat, up 0.06 percent, on Wednesday, roughly in line with a 0.1 percent rise in the Copenhagen boursE's bluechip index.
Maersk and other oil and gas producers in the Danish part of the North Sea pay between 60 and 70 percent tax on oil income.
Maersk said it would contribute relevant information for the government's review of the concession and it expected the government to honour existing agreements.
"The valid overall tax level for the period 2004-10 of over 60 percent of income corresponds to what the state required when entering the North Sea agreement," A.P. Moller-Maersk said.
"Higher oil prices have meant higher revenues and therefore higher tax payments, and so have benefited companies and the state," Maersk said.
The government will form a commission consisting of officials from the ministry of energy, climate and building, the finance ministry and the tax ministry to carry out the review of the concession by Aug. 31, 2012, the energy ministry said.
Denmark is western Europe's third biggest oil producer after Norway and the UK, with 2010 production of about 14.2 million standard cubic metres of oil, or about 245,000 barrels per day.
"We will see if we can find a new balance so that producers get more incentive to invest in increased oil and gas production, while at the same time they and the state get larger revenues from this activity in the North Sea," Climate, Energy and Building Minister Martin Lidegaard told Reuters.
The oil recovery rate in the Danish sector of the North Sea is about 24 percent, and every increase of one percentage point in that rate boosts revenues by 60 billion Danish crowns ($10.9 billion), according to the Danish Energy Agency.
"The government wants society to get the biggest possible dividend from oil and gas resources," the ministry of climate, energy and building said in a statement. "But at the same time, conditions should be competitive so that there will continue to be interest in investing here in Denmark."
In 2003, the government extended the Maersk group's concession to July 2042.
Under that deal, oil taxes rose for the remainder of a concession period expiring in 2012 and the government got a one-fifth stake from next year in the Maersk-led Danish Underground Consortium (DUC), which produces most of Denmark's oil and gas.
Maersk is operator and owns 39 percent of DUC. Royal Dutch Shell has 46 percent and Chevron a 15 percent stake in the partnership.
Lidegaard said conditions have changed since the previous centre-right government made the deal with Maersk in 2003.
"Since 2003 the oil price has more than quadrupled the level that was assumed when the agreement was made," he said. "However the corporate tax has been reduced several times which means lower taxes from the North Sea than was assumed in 2003."
The ministry said any eventual changes in the terms of the North Sea agreement would take place within the framework of the existing agreement or by way of a new negotiated deal.
It said the review would look into the consequences of the North Sea concession in light of the rise in the oil price.
The first reports that the government would seek to adjust the concession came on Tuesday evening.
Shares in A.P. Moller-Maersk closed nearly flat, up 0.06 percent, on Wednesday, roughly in line with a 0.1 percent rise in the Copenhagen boursE's bluechip index.
Maersk and other oil and gas producers in the Danish part of the North Sea pay between 60 and 70 percent tax on oil income.
Maersk said it would contribute relevant information for the government's review of the concession and it expected the government to honour existing agreements.
"The valid overall tax level for the period 2004-10 of over 60 percent of income corresponds to what the state required when entering the North Sea agreement," A.P. Moller-Maersk said.
"Higher oil prices have meant higher revenues and therefore higher tax payments, and so have benefited companies and the state," Maersk said.
The government will form a commission consisting of officials from the ministry of energy, climate and building, the finance ministry and the tax ministry to carry out the review of the concession by Aug. 31, 2012, the energy ministry said.
Denmark is western Europe's third biggest oil producer after Norway and the UK, with 2010 production of about 14.2 million standard cubic metres of oil, or about 245,000 barrels per day.