Denmark Exits the Fossil-fuel Industry
The last oil and gas company owned by any Danish company is being sold. Even more important, this is happening without a single governmental concern about what it will mean to no longer control a single fossil-fuel-making enterprise.
This is indeed the end of an era for Denmark and is symbolic of what is coming for the rest of the world.
This sale involves A.P. Moller-maersk A/S’S oil and gas division. With just a couple of pen strokes and zero dissension from the Danish government, the deal to sell that division to French petroleum giant Total for $7.45 billion has just been made. After some regulatory materials have been filed and with a few more formal sign-offs, the deal will be completed sometime in 2018.
Denmark’s Dong Energy used to be a state utility, with its name being an acronym for Danish Oil and Natural Gas. Now known mostly for its renewableenergy ventures, with a special emphasis on the wind industry, Dong made a similar move only three months earlier when it quietly sold off its North Sea oil and gas production to INEOS AG of Germany.
Dong plans to use some of the money made on the divestment to build more offshore wind parks, in Europe and across the world. It is currently the world’s largest operator of offshore wind turbines. Wind energy is a major growth industry right now and one of the cleanest energy operations in the world.
The Maersk oil division sale happened, if anything, even more quietly. The government and trade unions openly supported the decision. The Danish People’s Party, the nationalist group supporting the government in parliament, which some felt might object to this final sale on strategic grounds, had no argument with the move.
By exiting the fossil-fuel market, Denmark will not eliminate its reliance on the money made from those reserves. As part of the deal with Total, the North Sea fields need to continue producing for a little while. Denmark needs some of that income to help pay the final costs of halting all use of fossil fuels in any way by 2050.
For Denmark, part of the ease of making this transition is that taxes collected by the government on the oil and gas industry is less than a tenth of what it was. Another reason is that, as the University of Copenhagen’s Peter Kurrild-klitgaard, a professor of political science there, said, “there’s no energy crisis [here in Denmark]. We have more sources of energy than ever before.”
Denmark entered the oil and gas markets 55 years ago, in 1962, when Maersk’s founder, Arnold Peter Møller, felt it was critical to enter those industries to keep Germany from plundering Denmark’s vast North Sea oil reserves. It is also one of those odd coincidences that many of the technical skills Denmark’s corporations developed while working in that brutal offshore oil
exploration environment – with waves, cold and wind – positioned the country well to become one of the most skilled implementers of offshore wind power technology anywhere.
The contrast between Denmark and the United States on these issues could not be starker. Across the entire United States, crude oil production has risen over the past five years, from 6,497,000 barrels per day in 2012 to 8,853,000 in 2016. That represents an increase of 36%. True, there was a dip from the 2015 peak of 9,408,000 barrels recorded in 2015. That, however, was only a 5.8% drop, and while it may have in part been related to the increased use of renewable energy within the United States, a far more important cause may have been the curtailment of damaging oil exploration approaches, which were cut back by the Obama administration late in 2015.
Under President Trump, the oil and gas industry is getting further government “gifts” in the form of emissions constraint rollbacks, various protections for the coal industry, the allowance for increased offshore exploration and the opening up of newly accessible public lands where the fossil-fuel providers will be able to search for oil. With lower emissions constraints and increased availability of lower-cost drilling options, this is a boom time for the U.S. oil industry – again.
While that may give the American oil and gas industry a bit of regulatory “breathing room,” the real breathing room is going to come instead from countries like Denmark, where the oil industry is no longer part of the energy supply equation. By making that transition so early and so effectively, Denmark has positioned itself to be the home of the new generation of energy provider giants.
In contrast, the United States’ bet on the oil and gas industry is a dying one – an addiction to fossil fuels, which is not only environmentally corrupt but will soon prove to be a bad economic one as the country loses ground to leaders like Denmark.