Den­mark Ex­its the Fos­sil-fuel In­dus­try

Trillions - - In This Issue -

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.

Photo by CGP Grey, CC

Photo by Porter Green LLC, CC

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