Denmark

KeyFigures________________________________________________________________2 Overview _________________________________________________________________3 1.EnergyOutlook __________________________________________________________4 2.Oil_____________________________________________________________________5 2.1MarketFeaturesandKeyIssues__________________________________________________5 2.2OilSupplyInfrastructure________________________________________________________7 2.3DecisionmakingStructureforOilEmergencies______________________________________9 2.4Stocks _____________________________________________________________________10 3.OtherMeasures ________________________________________________________12 3.1DemandRestraint____________________________________________________________12 3.2FuelSwitching_______________________________________________________________13 3.3Others_____________________________________________________________________13 4.NaturalGas ____________________________________________________________14 4.1MarketFeaturesandKeyIssues_________________________________________________14 4.2Naturalgassupplyinfrastructure________________________________________________16 4.3EmergencyPolicyforNaturalGas _______________________________________________17

ListofFigures
TotalPrimaryEnergySupply _____________________________________________________________ 4 _ ElectricityGeneration,byFuelSource______________________________________________________ 4 DanishCrudeOilProductionandPossibleProductionProfile ___________________________________ 5 _ OilConsumption,byProduct_____________________________________________________________ 6 OilDemand(kb/d) _____________________________________________________________________ 6 OilInfrastructureMap __________________________________________________________________ 8 RefineryOutputvs.Demand _____________________________________________________________ 8 OilStorageCapacity,byMainStorageOperator(thousandbarrels) ______________________________ 9 PublicOilStockholding(FDO),bytype,end2010 ___________________________________________ 11 OilConsumptionbySector______________________________________________________________ 13 DanishNaturalGasProductionandPossibleProductionProfile ________________________________ 14 _ NaturalGasConsumption,bySector______________________________________________________ 15 NaturalGasTransmissionSystem ________________________________________________________ 16

DENMARK

DENMARK

OVERVIEW
Oil and natural gas represented respectively 36% and 22% of the Denmarks total primary energysupply(TPES)in2009.Whilethecombinedshareofthetwofuelsinthesupplymixhas remainedrelativelystableoverthepastthreedecades,ataround60%ofTPES,oilssharehas beenreduceddramaticallyfromthenearly90%itrepresentedintheearly1970s.Atthesame time,Denmarkhasoneofthelowestenergyintensitiesintheworld,andwhileitseconomyhas grownby78%since1980,itsenergyusehasremainedalmostunchangedovertheperiod.The Danish Administration is now considering the introduction of a longterm target of becoming fullyindependentoffossilfuelsby2050. Totaloildemand,nearly170kb/d,isnotexpectedtochangesignificantlyinthecomingyears, withgrowingdemandfordieselbeingoffsetbydecliningdemandforotherfuels.Demandfor naturalgas,justunder5bcmin2010,isexpectedtodeclineinthecomingyearslargelyduetoa shifttowardsrenewableenergyinthepowersector. Denmarkisanetexporterofoilandnaturalgasandcanbeexpectedtoremainsoatleastuntil end2018 and 2020, respectively. Extending self sufficiency beyond these dates will for the mostpartdependonfuturetechnologicaldevelopmentsupstream,butevenoncethecountry becomesanetimporter,thiswouldlikelyonlybemarginalintheperiodpriorto2035. Asanetexporter,DenmarkhasnostockholdingobligationtotheIEA.AsamemberoftheEU, Denmarkhasastockholdingobligationof67.5daysofconsumption.TheAdministrationgoes well beyond this, setting a compulsory stockholding obligation on industry of 81 days of consumption.Some70% ofthisiscoveredbythe Danishstockholdingagency,FDO,largelyin theformofrefinedproducts.InanIEAcollectiveaction,Denmarkwouldlikelyparticipatewith thereleaseofoilfromtheFDOstocks.Demandrestraintmeasureswouldonlybeconsideredin asevereandprolongeddisruption. Concerning the security of natural gas, the TSO, Energinet.dk, is responsible for maintaining minimum standards and preparing an annual plan for assuring security of supply. In a crisis, Energinet.dkwouldtakeovertheroleofgassuppliertotheDanishmarket,withanobligation toensuresuppliesofgastothenoninterruptibleDanishendusers.Itwoulddothisbydrawing onmeasuresonlyavailabletoEnerginet.dkinemergencysupplysituations,i.e.deliveriesfrom thetwoundergroundstoragesitesinDenmark,reroutingofnaturalgassupplyfromtheNorth SeaviatheSydArnepipelineandlimitingsuppliestointerruptibleendusers.

DENMARK

1. Energy Outlook
TheDanisheconomyhas grownby78%since1980,yetoverthissameperiodits totalenergy usehasremainedalmostunchanged,attestingtotheadministrationspolicytopromoteenergy savingsandattainahighlevelofenergyefficiency. Oil and natural gas represented respectively 36% and 22% of the Denmarks total primary energysupply(TPES)in2009.Whilethecombinedshareofthetwofuelsinthesupplymixhas remainedrelativelystableoverthepast3decades,ataround60%ofTPES,oilssharehasbeen reduceddramaticallyfromthenearly90%itrepresentedintheearly1970s.Renewableenergy, mainlybiomassandwind,represented20%ofTPES TotalPrimaryEnergySupply
25

milliontonnesofoilequivalent

20

Hydro/ Renewables/ other NaturalGas

15

10

Oil

Coal
0

Source:EnergyBalancesofOECDCountries,IEA

While Denmark has one of the lowest energy intensities in the world, the Administration is consideringtheintroductionofalongterm(e.g.2050)targetofbecomingfullyindependentof fossil fuels, a policy which would further encourage greater energy efficiency, growth in renewableenergyproductionandelectrificationofenergyenduse(e.g.transport). ElectricityGeneration,byFuelSource
60 50 40

Other Hydro Nuclear NaturalGas Oil Coal

TWh

30 20 10 0

ElectricityUse
Total electricityconsumption, includingownuse,distribution losses,pumpedstorage,etc.

Source:EnergyBalancesofOECDCountries,IEA

DENMARK

2. Oil
2.1 Market Features and Key Issues
Domesticoilproduction
OilproductioninDenmarkbeganin1972androsesteadilyuntilreachingapeakin2004,when production averaged nearly 390 kb/d. Production has since declined steeply and in 2010 it averagedsome245kb/d.Danishoilproductioncomesexclusivelyfromoffshoreinstallationsin the Danish North Sea, where there are 19 producing fields. The main crude stream, Danish CrudeBlend,isamediumlightsweetqualitythathasahighmiddledistillateyield. The Danish Energy Agency (DEA) makes an assessment of the countrys oil and gas reserves annually.TheDEAsclassificationsystemdividesDanishoilandgasresourcesintofourclasses: reserves,contingentresources,technologicalresources(estimatedadditionalvolumespossible from future new technologies such as CO2 injection) and prospective resources (estimated additional volumes recoverable from new discoveries). Based on this, the DEA establishes its productionforecastwhich,togetherwithitsforecastforconsumption,isusedtopredictwhen thecountrywillbecomeanetimporterofoilandgas. Oilproductionisexpectedtocontinuetodeclineinthecomingyears.AccordingtotheDEAs expected production profile, which is based on the assessed reserves and riskweighted contingentresources,Denmarkwillremainanetexporterofoiluptoandincluding2018.The oilconsumptionforecastassociatedwiththisestimateisformoderateincrease,averaging0.4% peryearto2030. DanishCrudeOilProductionandPossibleProductionProfile

Source:DanishEnergyAgency

Denmarks period of selfsufficiency in oil can potentially be prolonged with additional production coming from technological developments and new discoveries. However the estimatesfortheseresources,unliketheexpectedproductionprofile,aresubjecttoahighlevel ofuncertainty.Ifrealised,thesewouldbeexpectedtocontributesubstantiallyovertheperiod from2020to2035anddeclinethereafter.SuchascenariowouldlikelyresultinDenmark,over thisperiod,alternatingbetweenbeinganetexporteranda(marginal)netimporterofoil,with oilimportdependencygrowingsteadilyintheyearsafter2035.

DENMARK The DEAs estimate of technological resources is based on increasing the average oil recovery rateby5%.Currentlytherecoveryrate(theratioofultimateoilrecoverytototaloiloriginallyin place) of Danish oil production is relatively low, averaging around 24%. The 5% increase is expected to derive primarily from new techniques used for CO2 injection. Government initiativesforenhancedoilrecoveryincludeanindependentassessment,preparedbytheNorth SeaFund,theDEAandMaerskOilandGas,oftheexistingworldwideexperiencewithdifferent methodstorecovermoreoilfromthefields.

Oildemand
In 2010, indigenous crude production averaged just over 245 kb/d. In the same year, Danish refineriesprocessedsome7.2milliontonnes(Mt)ofcrudeoil,orjustunder150kb/d. OilConsumption,byProduct
250 200 150 100 50

thousandbarrelsperday

Naphtha MotorGas JetandKerosene Diesel OtherGasoil ResidualFuels Other

Source:MonthlyOilStatistics,IEA

OilproductdemandinDenmarktotaledsome8Mtin2010,oranaverageofnearly168kb/d. Thisrepresentsadeclineintotaloiluseatanaveragerateof2.7%since2001.Inthisperiod, demandforoiluseinthetransformationandresidentialsectorsdeclinedsubstantially.Theuse of fuel oil in power generation is declining and the use of heating oil is subsiding due to the increasedconnectionofhomestodistrictheatingwhichisprimarilyfuelledbyrenewableenergy ornaturalgas.Atthesametime,demandfortransportdieselcontinuedtogrowandaveraged 2.7%p.a.intheperiodfrom2001to2010. Totaloildemandisnotexpectedtochange OilDemand(kb/d) significantly in the coming years. The % change 2001 2010 Danish Energy Agencys projection for oil p.a. demand, which is the basis for forecasting -3.5% LPG and Ethane 2.3 1.6 Naphtha the countrys oil selfsufficiency (see -2.3% Gasoline 44.9 36.5 section above on oil production), assumes 0.0% Kerosene 18.2 18.2 oil consumption to grow moderately, 2.7% Diesel 48.5 61.5 averaging 0.4% annually to 2030. -5.3% Heating/other Gasoil 39.7 24.4 However, the Danish oil industry -5.4% Residual Fuels 22.2 13.5 Other Products 37.8 11.9 -12.0% association as well as the independent -2.7% 213.4 167.5 public stockholding agency, FDO, expect Total Products Source:MonthlyOilStatistics,IEA totaloilconsumptiontodecreasegradually

DENMARK in the coming decade (0.5% p.a.), with demand to 2020 declining annually for gasoline (4% p.a.),heatingoil(8%)andfueloil(10%).Nevertheless,demandfortransportdieselisexpected tocontinuetogrowatarateof2%annually,whichwouldequatetosome67kb/din2015and 74kb/din2020,comparedto61.5kb/din2010. The transport sector accounts for twothirds of all oil used in Denmark. Diesel is the single largest component in the mix of oil products used in the Denmark and in 2009 it represented over55%ofthefuelsconsumedinthecountryforroadtransportation.Automotivedieselhasa price advantage for consumers due to a lower tax rate compared to gasoline. The Administrationmaintainsexcisedutiesondiesel(EUR0.383/litrein2009)lowerthanthatwhich itplacesonmotorgasoline(EUR0.562/litre).

Imports/exportsandimportdependency
Denmarkhasbeenanetexporterofcrudeoilsincethemid1990s.In2010,roughly155kb/dof the 245 kb/d of domestic production was exported. In the same year Denmark imported just over55kb/dofcrudeoil,primarilyfromNorway,fordomesticrefining. In terms of refined products, Denmark is marginally a net importer. In 2010, product net importswerelessthan20kb/d. Generally,Denmarkisanetexporterofgasolineandfueloil andanetimporterofmiddledistillates.Denmarkstotalnetexportsofoil,includingbothcrude andrefinedproduct,equatedto82kb/din2010.

OilCompanyOperations
Oil production on the Danish Continental shelf is dominated by 3 companies; Maersk (the operatorof15fields),DONG(3fields)andHess(onefield). Inthedownstreamoilsector,approximately90%ofthemarketisrepresentedby5companies: Statoil, Shell, Kuwait Petroleum, UnoX and OK. All are members of the Danish Petroleum Association,EOF.ConsolidationintheDanishoilindustryhascontinuedoverthepastdecade, with many smaller companies being purchased by the larger companies. The acquisition by Statoil of Conoco/Jet is one of the more significant examples of this consolidation in recent years.Statoilhasalsoannouncedthatitwillputitsretailandindustrysalesorganisationintoa separate,publiclytradedcompany.

2.2 Oil Supply Infrastructure

Refining
Denmarkhastworefineries,oneinKalundborgandtheotherinFredericia,withatotal crude distillation capacity of 173 kb/d. The Kalundborg refinery (102.5 kb/d), owned by Statoil, primarilyrunsNorwegiancrude,butisflexibletoruncondensatesandothercrudes(e.g.Danish crude).Allcrudeoil,includingcondensates,issuppliedbyship.TheFredericiarefinery(70kb/d), ownedbyShell,processesmostlyDanishNorthSeacrudeoilsuppliedbypipelinefromDanish offshoreproduction.

DENMARK In comparison to Danish oil demand, the domestic refineries produce a surplus of gasoline and residual fuel oil and a deficit of middle distillates. Trade in refined products is thus necessary to balance domestic supply and demand. At the same time, companiescompetingintheDanish market often import products from other suppliers rather than purchase from their competitors operatingdomesticrefining. RefineryOutputvs.Demand
2010
LPGandEthane Naphtha Gasolines JetandKerosene Gas/DieselOil ResidualFuels OtherProducts
0 20 40 60 80 100

RefineryOutput Demand

thousandbarrelsperday

PortsandPipelines

Source:MonthlyOilStatistics,IEA

Denmarkhasonecrudeoilpipelineconnectingsomeoftheoffshoreproductiontotherefinery and export terminal, both at Fredericia. Owned and operated by DONG Oil Pipe A/S, the pipelineis330kmlongandhasacapacityof360kb/d. A product pipeline system, NEPS (Northern European Pipeline System), extends from Heide (Germany) to North Jutland and is owned and operated by the Danish military forces. In addition,theFDOownsandoperatesanumberofproductpipelinesinJutlandandinZealand, includingonefromtheKalundborgrefinerytotheHedehuseneterminal.Thispipelinesuppliesa largevolumeofoilproductstotheCopenhagenarea. OilInfrastructureMap

DENMARK In addition to the ports at the refineries, the main terminals for loading and off loading oil productsontankersaretheportsofAalborg,Aabenraa,CopenhagenandStigsnaes.Thevarious otherportsareusedforonlyimportingoilproducts.

Storagecapacity
ThetotalstoragecapacityinDenmarkisjustover49mb(7.8millioncubicmetres).Nearly5.9 mbofthiscapacityisforcrudeoilatthetworefineries(FredericiaandKalundborg). Denmark has a number of coastal and inland product storage facilities that also serve as terminalsforthedistributionsystem,whichismainlycarriedoutbytrucks.Themajorproduct storagesitesarelocatedattherefineriesandatamajorterminalonZealandatStigsns. OilStorageCapacity,byMainStorageOperator(thousandbarrels)
Storage site Fredericia Kalundborg Stigsns/Gulfhavn Copenhagen Aalborg Aabenraa Aarhus FDO underground (15 sites) Powerplants (various locations) Other Total Denmark Crude Oil 3 214.1 2 667.7 5 881.8 Gasoline 935.9 1 250.9 317.0 364.8 349.7 1 886.9 74.2 5 179.5 Distillates 5 677.8 2 946.5 4 038.1 3 826.1 654.1 918.3 1 016.4 3 427.9 641.6 587.5 23 734.3 Fuel oil 1 385.6 3 180.8 2 440.4 495.6 1 509.6 1 566.2 257.9 3 478.3 37.7 14 352.1

TotalRefined TotalOil Product (crude&product)

7 999.4 7 378.2 6 478.5 4 638.7 2 528.5 2 484.5 1 624.0 5 314.9 4 119.8 699.4 43 265.9 11 213.5 10 045.9 6 478.5 4 638.7 2 528.5 2 484.5 1 624.0 5 314.9 4 119.8 699.4 49 147.7

Source:DanishAdministration

Approximately 12.6 mb (2 million cubic metres) of the countrys storage capacity is owned by the stockholding agency, FDO. This includes a network of 15 underground storage sites, operated directly by the FDO, with total capacity of some 5.3 mb for gasoline and gasoil. The amountalsoincludestheFDOstwoabovegroundstoragefacilitiesinconnectionwiththetwo domesticrefineries.Theseareintegratedwiththeoperationsoftherefineriesandareoperated byrefinerypersonneltofacilitatetherefreshmentofproducts.InFredericiathecapacityisclose to5mb(800,000m3)forgasoilandheavyfuelandinKalundborgthecapacityisapproximately 2mb(330,000m3)forgasoil.

2.3 Decision-making Structure for Oil Emergencies

TheDanishMinisterforClimateandEnergyisresponsibleforenergymatters,includingsecurity ofoilsupplyandrelationswiththeIEAandtheEuropeanUnion.Withinthisministry,theDanish Energy Authority (DEA) handles all matters regarding energy, including the preparation of an implementationplan,whichissubmittedtotheminister.Denmarksresponsetoanoilsupply crisis would be the use of oil stocks held by the stockholding agency, FDO. Specific demand restraint measures have not been prepared and would not be a part of an initial response. Howeverinasevereandlonglastingcrisis,lighthandedmeasureswouldlikelybeconsideredto supplementtheuseofFDOstocks. Under the DEA, the Danish National Emergency Strategy Organisation (NESO) consists of an emergencyunitanddataunit,eachstaffedwith2parttimeemployees,andisthecorebodyto

DENMARK coordinate issues among all stakeholders such as the Danish member of the IEA Governing Board,thepressofficeroftheDEAandvariousadhocgroupsthatcouldbeestablishedinthe case of an oil crisis. The emergency unit handles all matters regarding the compulsory stockholding obligation (CSO), tasks related to the FDO and dialogue with the companies regarding their CSO. It also handles stockholding ticket applications and bilateral agreements withotherEUMemberStates.Thedataunitisresponsibleforcollectingallrelevantoildataand calculatingtheCSOofcompaniesaswellasdatareportingtotheIEASecretariat. In a crisis, the NESO would be expanded, as necessary, with other DEA staff in order to implementemergencymeasuresincooperationwithotherenergysectoroperations.Itwould convene meetings of the Danish Oil Advisory Board in order to create an opportunity for relevantauthoritiesincludingtheoilindustrytoassessthecrisis,evaluateresponseoptions and define implementation measures. The Board has representatives from the following agenciesandorganisations: The DEA and other authorities including mandatory participation of the Ministry for ForeignAffairsandtheDanishCompetitionAuthority. Allmajoroilcompanies,bothdownstreamandupstream; TheDanishTSO,Energinet.dk; TheAssociationofDanishPowerCompanies; TheAssociationofDanishOilCompanies; TheDanishCompulsoryOilStockAssociation(FDO). In a crisis, the DEA would propose emergency response measures to the Minister for Climate andEnergythroughtheMinistry.Inpreparingsuchaproposal,assumingthatthisonlyconsists ofreleaseofFDOstocks,theDEAwouldcommunicatewiththeFDO.Ifadecisionisneededto betakenquickly,itwouldnotbenecessarytohaveameetingoftheDanishOilAdvisoryBoard priortoadecision,butsuchameetingwouldthenbeheldafterwards.TheMinisterwould,in connectionwiththedecisionontheresponsemeasure,informtheDanishParliamentsEnergy Committeeaboutthesituation.

2.4 Stocks

StockholdingStructure
Duetoitsstatusasnetexporter,DenmarkcurrentlyhasnostockholdingobligationtotheIEA. According to the EU directive 2006/67 Denmark has an obligation to hold 67.5 days of consumption. However, Denmark has decided to hold stocks at a level of 81 days of consumption,aslegislatedbyActno.1275of20December2000.Theregulationstipulatesthat any company that produces or imports more than a thousand tons of oil equivalent per year mustholdcompulsorystockscorrespondingto22.2%oftheirannualdomesticsales. Theprivatesectorcoverstheentirestockholdingobligation,withthebulkofthiscoveredbythe nongovernmental stockholding association established (by the private sector) in 1964. The DanishCompulsoryOilStocksAssociation(FDO)isfinancedbyoilcompaniesandoperatesthe stockholdingontheirbehalf. TheFDOhasaboardofsixmemberselectedannuallybythemembercompanies(fromtheoil industry)andtheDEAparticipatesintheboardmeetingasanassociatedmember.Theinternal rules and regulations governing the FDOs operations, funding and management can only be changedprovidedthattheyareapprovedbytheMinisterforClimateandEnergy.TheFDOhas

10

DENMARK atotalof22employeesconsistingofasmalladministrativestaff(3.5persons)attheheadoffice and operational personnel to handle maintenance and pumping operations at the different storagesites.

CrudeorProducts
PublicOilStockholding(FDO),bytype, The FDO holds about 70% of the Danish end2010 compulsory stockholding obligation, mostly as finishedproducts.Individualcompaniesholdthe CrudeOil NGL& 9% remaining 30% in their commercial tanks. The Feedstocks totalCSOequatedtoroughly10.8mbin2010. 13% At the end of 2010, the FDO oil stocks totalled some 7.9 million barrels. This figure includes Middle some0.8mb(110000m3)ofcrudeoilstoredat Motor Distillates Gasoline the refinery in Kalundborg. It also includes 56% 22% 0.9mb (135 000 m3) of feedstock (straight run 7.9millionbarrels fuel)heldattheFredericiarefinerywhichisina Source:MonthlyOilStatistics,IEA solid form. The FDO has a detailed procedure thatensuresthatthisfeedstockcanbepumpedwithin6weeksofadecisiontodrawdown.

LocationandAvailability
DanishregulationsstipulatethatcompulsorystocksmustbestoredinDenmarkorinanotherEU member state, in accordance with a bilateral agreement. Without this being stipulated in the regulationsithasbeenpracticethatcompaniescannotfulfilmorethan10%oftheirobligation through stocks held abroad. Denmark has bilateral stockholding agreements with Estonia, Finland,Ireland,Latvia,theNetherlands,SwedenandtheUnitedKingdom. The FDO owned storage capacity (12.6mb in total) includes a network of 15 underground storage sites with a total storage capacity of 5.3 mb for gasoline and gasoil. Moreover, the agency owns some 200 km of pipelines that connect to the underground storage network (in somelocationstheFDOutilizestheNEPS).

MonitoringandNoncompliance
The DEA is responsible for monitoring compulsory stocks. All companies, including the FDO, report monthly data on their stocks to the DEA, which calculates the yearly stockholding obligation for each company according to the compiled figures. Under the legal requirement, companiesareobligedtoverifytheirdatasubmissionsannuallywiththeircharteredaccountant. Thedataarethencrosscheckedwiththedatareportedbyothercompanies. Ifthestockholdingcompaniesdonotholdtherequiredstocks,theDEAmayreportthecompany tothepolice.Thepolicewillinvestigatethematteranddecidewhethertoprosecutethecaseat theDanishcourts.

StockDrawdownandTimeframe
ThegovernmentofDenmarkhasstatutorypowerstodrawdownstocks,includingthoseheldby FDO,inordertoparticipateinanIEAcoordinatedresponse.

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DENMARK Whentheneedarisesforacompulsorystockdraw,theDEAsubmitsaproposalforthemeasures tobeusedtotheMinisterforClimateandEnergy.TheDEAalsocoordinateswiththeFDOand with countries in which significant quantities of stocks are held under bilateral agreements. Ministerialdecisionsontherequiredstockdrawareexpectedtobetakenwithin24hours.They are then communicated to the DEA, which ensures implementation in cooperation with the FDO. TheactualdrawdownofFDOstockisinitiatedthroughaninstructionfromtheDEAtorelease certain quantities (expressed in volume terms per product category). In the case of company heldcompulsorystocks,theprocedureistolowertemporarilythecompaniesCSO. MostoftheFDOsundergroundstoragesiteshavethepossibilitytoloadtrucksdirectlyatthe FDOdepotsandinadditiontheFDOisabletopumpoilproductstobiggerterminalsforloading. Pumpingratesvarybetween18and90kb/d(120and600m3/h).

FinancingandFees
AllDanishstocksareheldandfinancedbyprivateparties:thereisnofinancialsupportfromthe governmentfortheindustrysstockholdingobligations.Thecostsofholdingcompulsorystocks aredeemedtobeincludedinconsumerpricesandbornedirectlybyconsumers. Until 1992, the FDO was financed by invoicing the companies for the cost of the FDO stock coverageontheirbehalf.Duetoareductioninthecountrysstockholdingandtheamortisation ofstoragefacilities,theFDOfounditselfwithaconsiderablefinancialsurplus.Ithassinceused thissurplustofinanceitsoperations.

3. Other Measures
3.1 Demand Restraint
Inasevereandlonglastingoilsupplydisruption,Denmarkwouldconsiderlighthandeddemand restraint measures as supplementary measures to the use of compulsory stocks. The first demandrestraintmeasuresthatwouldbeconsideredarelikelytobeappealsandguidanceto thepublicthroughthemediaforvoluntarymeasures.Moresystematicinformationcampaigns could be implemented (e.g. about ecodriving, the promotion of public transportation and carpooling) potentially combined with measures to make alternative forms of transportation moreattractive.Subsequently,compulsorymeasuresmaybeconsidered,likelyatfirstdirected at public authorities and secondly directed at the general population or selected parts of the population. ThelegalframeworkforenactinganydemandrestraintmeasuresistheConsolidatedActno.88 of 26 February 1986 on Supply Measures. Under this Act the Minister may, in time of an internationallyinducedcrisis,stipulateprovisionsabouttheuse,distribution,priceequalization andlocationofstocksofcommodities.

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DENMARK OilConsumptionbySector1
100%
shareoftotaloilconsumption

Transformation/Energy Residential Commercial/Agriculture/ Other Industry Transport

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Source:OilInformation,IEA

3.2 Fuel Switching

The Danish potential for fuelswitching from oil to coal or natural gas in the power and heatingplantsislimited.Thepricestructuresforoil,coalandotherfuelshavealreadyresulted in most of this potential being realized. The large central power plants are not oilfired apart from peak and reserve capacity which cannot switch to other fuels. Likewise, some heating plantsareoilfired,butcannotswitchtootherfuels.

3.3 Others
Thereisnolegislationwhichcoverstheissueofsurgeproduction.TheDanishoilproductionin the North Sea is normally operated at full capacity and possibilities for surge production have not been identified. In specific crisis situations there could be possibilities for some surge production,dependingonthedurationofthecrisis,butthisisnotpartofDenmarksemergency responsemeasuresforrespondinginacrisis.

TotalConsumption(includingrefineryconsumption),doesnotincludeinternationalmarinebunkers.

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DENMARK

4. Natural Gas
4.1 Market Features and Key Issues
Gasproductionandreserves
In1984DenmarkbeganproducingnaturalgasfromtheNorthSeaandhasbeennetexporterof natural gas since then. Production comes primarily from the Tyra, Halfdan, Dan and Tyra SE Fields,whichaccountforthreequartersoftotalDanishgasproduction.Approximately10%of totalproductionisusedinthefieldasfuel,forinjectionorisflared.Theproportionofnatural gas used as lift gas in wells with increasing water production could grow significantly in the comingyearsasoilextractionbecomesincreasinglydifficultfromagingfields. Production peaked in 2005, with a total of 10.4 billion cubic metres (bcm) produced. Total productionhasdeclinedsteeplysinceandwassome8.2bcmin2010. WhileDanishgasproductionisexpectedtocontinuetodeclinesharplyintheimmediateshort term,itwillincreasesubstantiallyin2014and2015duetothedevelopmentofnewandexisting fields. Based on the DEAs expected production profile, Denmark is expected to remain a net exporter of gas up to and including 2020. The gas consumption forecast associated with this estimateisforadeclineingasdemand,averagingroughly1.3%peryearto2030. DanishNaturalGasProductionandPossibleProductionProfile

Source:DanishEnergyAgency

Aswithoilproduction,thereisthepotentialforprolongingtheperiodofselfsufficiencyingas supplies. When including technological and prospective resources, the DEA estimates that Denmarkwillbeanetexporterofgasbeyond2030.

Gasdemand
Demandfornaturalgasin2010wasjustunder5bcm,comparedto4.4bcmin2009,thelatest year for which data on consumption by sector is available. In that year, the bulk of gas consumption,44%,wasusedforpowergenerationinthetransformationsector.Industrymade upthesecondlargestgroup,representing17%ofgasuse,whiletheenergysector,wheregasis usedforoilextraction,representedanother16%.

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DENMARK NaturalGasConsumption,bySector
6,000 5,000

Transformation Energy Dist.losses Residential Commercial/other Industry

millioncubicmetres

4,000 3,000 2,000 1,000

Source:NaturalGasInformation,IEA

DailygasconsumptioninDenmarknormallyrangesfromalevelofaround4millioncubicmetres per day (mcm/d) in the summer to 20 mcm/d in the winter. The expected maximum daily consumptionwhentemperaturesreachminus13Cisabout25.3mcm/d FutureDanishgasconsumptionisexpectedtodecreaseby1.3%peryearfrom2010to2030. Thiswouldinferagasdemandofsome4bcmin2015and3.8bcmin2020.Thereasonforthe forecasteddeclineisgreaterenergyefficiency,adecreaseingasuseatpowerplants,adecrease ingasconsumptionatdecentralizedCHPasaconsequenceofwindpowerdevelopmentanda shifttowardsbiogas.However,theuseofgasinconnectionwithupstreamoilproductioncould potentiallygrowasoilextractionbecomesharderfromagingfields,thuscounteringreductions ingasusefurtherdownstream.

Gasimportdependency
Denmark is a net exporter of natural gas. In 2010, indigenous gas production in Denmark totalled 8.2 bcm. At the same time, a total of some 3.5 bcm of natural gas was exported to Sweden,GermanyandtheNetherlands. Swedish gas demand (1.6 bcm in 2010) is supplied entirely with gas that flows through the Danishnetwork.WhileDenmarkisexpectedtoremainanetexporterofgasatleastuntil2020 (seeproductionsectionabove),therecouldbeaneedforDenmarktoimportgasmuchsooner than forecasts for selfsufficiency suggest. In particular, the outlook for Danish production indicates that in 2013 imports will be required to meet the combined gas demand of both DenmarkandSweden.

GasCompanyOperations

TheDanishnaturalgasmarketisliberalisedandtherearenobarrierstonewentrants.Thestate ownedTSO,Energinet.dk,ownsandoperatesthetransmissionnetworkacrossthecountryand therearethreedistributionnetworkoperatorsaswellasfiveactiveplayersintheretailmarket. The gas storage facilities, Stenlille and Lille Torup, are owned and operated by DONG Storage andEnerginet.dkGasStorage,respectively.Anindependentregulator,DanishEnergyRegulatory Authority (DERA), oversees the operation of the market. A newly opened gas exchange (Nord PoolGas)isalsoexpectedtocontributetothetransparencyandefficiencyofnaturalgasprice formation.

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DENMARK

4.2 Natural gas supply infrastructure

PortsandPipelines
NaturalGasTransmissionSystem

Source:Energinet.dk

The Danish gas transmission system consists of upstream pipelines in the Danish part of the North Sea and onshore transmission pipelines. The transmission pipelines go northsouth (AalborgEllund)andwesteast(NybroDragr),andthedistributionpipelinesaremadeupofa grid of pipeline systems to the consumers. Moreover, the natural gas transmission system consists of a gas treatment plant (Nybro) and two underground gas storage facilities (Stenlille andLilleTorup). TheDanishgastransmissiongridisconnectedtotheGermangastransmissiongridatEllundon theDanish/GermanborderandtotheSwedishgassystematDragr.Swedenissolelysupplied withgasviatheDanishgassystem. Natural gas from the Danish section of the North Sea is transported through two offshore pipelinesfromtheTyraandSydArnefieldstotheshorenorthofEsbjergatamaximumpressure of138bar.Insummerwithlowerdailyquantities,theoutletpressureisreducedtominimisethe energyconsumptionforcompression.Inwinter,thepressureisincreasedtoalsoensurelarge volumesoflinepack(iethegasvolumenaturallystoredintheactualgaspipelines)foruseinthe event of disruptions and emergency situations. The TyraNybro pipeline has a capacity of approximately28.5mcm/d(27millionNm3/day);theSydArneNybropipelinecapacityis13.7 mcm/d(13millionNm3/day). Onshore,thenaturalgaspassesthroughagastreatmentplantinNybro.Here,thequalityofthe gas is checked and measured, and pressure is reduced to the maximum pressure for land pipelines of 80 bar. The plant can also reduce the content of impurities such as heavy hydrocarbons, and remove any hydrogen sulphide if necessary for the gas to comply with the agreedspecifications.Ifthegasistobecleaned,onlyreducedvolumescanbesupplied(about 50%).

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DENMARK ThesecurityofsupplywasimprovedwiththeSydArnepipeline,constructedin1999andmaking it possible to redirect gas production from the Tyra facilities to the Syd Arne pipeline. In addition, a new pipeline was commissioned in 2004, connecting the Tyra facilities to the F/3 platform in the Dutch sector. The pipeline allows the transport of gas through the existing NOGATpipelinetotheNetherlandsforthepurposeofsellinggastotheDutchmarket.Itisnot currentlypossibletoimportgasintoDenmarkviathispipeline.

Storage
TherearetwonaturalgasstoragefacilitiesinDenmarkwithatotalcapacityof1bcmofworking gas. The storage facilities are primarily used to even out seasonal fluctuations, as the daily demandfornaturalgasduringthewintercanreachlevels67timesthatofsummer.Thestorage can also be used as emergency storage facilities in case of interruptions to gas deliveries. The TSO,Energinet.dk,hasaccesstoavolumeofthisgas,fixedannually(approximately215mcmin 2009/2010), as part of the available emergency response measures (see emergency policy sectionbelow). The storage facility in Lille Torup (Northern part of Jutland) is owned by Energinet.dk Gas Storage and comprises 7 salt caverns with a total firm working volume of 420 mcm. Firm injectioncapacityis3.6mcm/dandfirmwithdrawalcapacityisphysically14mcm/d.However, due to restrictions in the transmission system only 8 mcm/d is possible to be withdrawn. Energinet.dk Gas Storage has decided to begin releaching a cavern which will result in more workingvolumecapacity. ThestoragefacilityinStenlille(WesternpartofZealand)isanaquiferstorageownedbyDONG Energy.Thestoragehasatotalfirmworkingvolumeof588mcm.Firminjectioncapacityis4.8 mcm/dandfirmwithdrawalcapacityisphysically11mcm/d.However,duetorestrictionsinthe transmission system the storage is only able to offer 9.5 mcm/day. The Stenlille Gas Storage Facilitycanberelativelyeasilyexpandedtoaworkingvolumeofupto750mcm.

4.3 Emergency Policy for Natural Gas

TheresponsibilityforDenmarkssecurityofsupplylieswiththeTSO,Energinet.dk.Thisconsists ofobservingminimumstandardsandpreparinganannualplanforthesecuritygassupplies.The planmustdescribehowsecurityofsupplyisensuredduringtheperiodunderreviewandhowit willbeensuredinthecomingyearandnexttenyears.Inaddition,theplanmustaccountforthe meansusedtomaintainsecurityofsupplyinemergencysupplysituations. Securityofsupplyhasbeendeterminedonthebasisofanobjectivewhichstipulatesthat,inthe event of full or partial interruption of gas supply to the Danish market, the supply of uninterruptibleconsumersmust,ataminimum,bemaintainedfor: 3daysduringparticularlycoldperiods(definedasadailymeantemperatureof13C), which,onaverage,occurevery20years 60daysduringanormaltemperaturewinter(correspondingtotheexpectedrepairtime neededafterthebreakdownofanoffshorepipeline). Basedonhistoricaldata,adailymeantemperatureof13CisexpectedtoresultinDanishgas consumptionofapproximately25.3mcm/d(24.0millionNm3/day).

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DENMARK Inanemergencysupplysituation Energinet.dkwouldtakeoverthesupplies totheDanishgas market from the market players. To this end, Energinet.dk purchases alternative transport capacity in the Syd Arne pipeline, reserves capacity in the storage facilities and enters into agreementsoninterruptibilitywithanumberofmajorconsumers.Inordertofulfilitssecurity objective (3 days of extreme winter, 60 days of normal winter), every year Energinet.dk determinesthegasvolumestobecoveredbyeachoftheseemergencymeasures. Inaworstcasedisruptionscenario,supplieswouldbedisruptedonthelargestsourceofsupply (suppliesviatheTyraNybropipeline).Insuchacase,Energinet.dkcanmaintainthesupplyof gastoDenmarkusingsuppliesfromstorage,emergencysupplyfromTyraviaHaraldthroughthe Syd ArneNybro pipeline, and interruption of the largest natural gas consumers based on interruptible contracts. German and Swedish export customers can also receive gas in an emergencysituationprovidedthattheycanmakeasimilarvolumeofgasavailablefromoneof the storage facilities or in Nybro via Syd Arne. In the case of Sweden, the countrys total gas demand(1.6bcmin2010)isentirelymetbyimportsfromDenmark,nearlyallsuppliedunder interruptiblecontracts.

StrategicGasStocksandDrawdown
Energinet.dkhasaccesstoatotalofapproximately215mcmofstrategicstoragecapacityfilled with gas. This includes amounts reserved directly by Energinet.dk (the amount is determined each year) and volumes made available from shippers storage filling requirements. The majorityofthecapacityinStenlilleandLilleToruphasbeensoldunderfillingrequirementssuch thatthestoragecustomerscommitthemselvestomaintainingacertainstockvolumeduringthe yearagainstadiscount.Energinet.dkcompensatesthetwostoragecompaniesforthisandthus hasadditionalstockvolumeinemergencysituationsatitsdisposal.Eachyearon1March,12% oftheshippersstoragecapacitymustbeleftinstorage.

DemandRestraint
Energinet.dk has agreements with approximately 40 of Denmarks biggest gas consumers concerningtheinterruptionofsuppliesduringanemergencysituation. Approximately 20% of the total Danish gas consumption during winter (January and February) can be interrupted through these agreements. The terms of agreement can cover either an interruptionofgasdeliveryafter3hoursorafterthreedays,oracombinationofthese.Some consumershaveagreedtoa100%interruptionoftheirconsumptionwhileothersreducetheir consumption only partly. Thus, most of the CHPs, in such situations, plan to temporarily stop theirelectricityproductionandreducetheirgasconsumptiontocoverheatproductiononly.In general,theinterruptibleendusersplantoreducetheirconsumptionbyasmuchas75%incase ofsuchemergencysupplysituations.

FuelSwitching
Some of the interruptible customers can have a degree of fuelswitching abilities. This is the case for the three large power stations (Avedre II, H.C. rsted Power Station and Skrbk PowerStation)whicharedirectlyconnectedtothetransmissiongrid.Allthreeplantshavethe abilitytouseoilasabackupsupplysource,andEnerginet.dkcompensatesthepowerplantsfor covering20daysofoilstocks.However,Energinet.dkdoesnotrequireinterruptibleconsumers to hold stocks of alternative fuels, and has no systematic knowledge of their alternative fuel sourcesortheirabilitytocontinueproductionwhentheirgassupplyiscutofforreduced.

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Othermeasures
Energinet.dk has an emergency supply agreement which paves the way in emergency supply situationsforsuppliesof7.4mcm/dayfromTyraviaHaraldthroughtheSydArneNybropipeline fortheDanishmarket. In normal times, gas flows via the Harald pipeline from the Harald field to the Tyra platform where it is processed before being sent ashore via the Tyra pipeline. In an emergency supply situation,gaswouldflowintheoppositedirectionintheHaraldpipelineandbesentonshorevia the SydArne pipeline. In such instances, supplies from the SydArne field and the Harald field wouldbeexpectedtostopsincecapacityinthepipelinesislimitedandsuppliesfromtheTyra platformwouldtakeupthecapacity. Suchreroutingofgasflowswouldtakeupto3daystobeimplemented,andwouldtherefore notbepartofthe3dayemergencyresponsescenario.Forthepurposeofhandlingshorterterm interruptionsofsuppliesfromtheNorthSeainextremewintertemperatures,Energinet.dkhas reserved withdrawal capacity from the storage facilities to compensate for the lack of supply. Moreover,Energinet.dkcanmakeuseofthelimitedgasquantitieswhicharenaturallystoredin theactualgaspipelines(linepack).

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INTERNATIONAL ENERGY AGENCY

The International Energy Agency (IEA), an autonomous agency, was established in November 1974. Its primary mandate was and is two-fold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 28 member countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agencys aims include the following objectives: n Secure member countries access to reliable and ample supplies of all forms of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions. n Promote sustainable energy policies that spur economic growth and environmental protection in a global context particularly in terms of reducing greenhouse-gas emissions that contribute to climate change. n Improve transparency of international markets through collection and analysis of energy data. n Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies. n Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders.

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