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There are oil and gas deposits in the Danish part of the North Sea, and at the time of writing there are in total 19 oil- or gas-producing fields. The first concession (the Sole Concession) was granted to AP Møller-Maersk back in 1962 and covered the entire Danish area. Over the years, the Sole Concession has been amended by agreements with the Danish government, and areas have gradually been handed back to the Danish state.2

In December 2020, a broad majority in the Danish Parliament reached an agreement on the future of Danish oil and gas production (North Sea Agreement 2020).3 The North Sea Agreement 2020 constitutes, inter alia: (1) a cut-off date of 31 December 2050 for all oil and gas extraction; (2) a cancellation of the eighth licensing round, all future licensing rounds and the open-door procedure (however, two procedures – the mini-rounds and neighbour-block procedures – still exist); and (3) reduction of the geographic area for issuance of licences. The North Sea Agreement 2020 has been implemented through amendments to the Danish Subsoil Act, which entered into force on 1 January 2022.

Prior to the North Sea Agreement 2020, the Danish Energy Agency (DEA) finalised eight rounds of applications to obtain licences to explore for hydrocarbons in the North Sea.4

The Danish state participates through the independent entity Nordsøfonden5 in all licences granted since 2005 – no matter the procedure – with a 20 per cent stake.6 In addition, Nordsøfonden participates with a 20 per cent stake in the Sole Concession.

Denmark has been a net exporter of oil and gas since 1997. The DEA forecasts that Denmark will be self-sufficient with regard to natural gas until 2034 with the exception, however, of 2020–2024, which is mainly attributable to the redevelopment of the Tyra field that began in September 2019 and is scheduled to continue until the winter 2023–2024.7

For 2022, the DEA anticipated an oil production of 3.6 million m³ and a production of natural gas (sales gas) of 0.8 billion normal cubic metres (Nm³). Denmark's reserves of oil are as of 1 January 2021 estimated to be 141 million m³ and of sales gas to 73 billion Nm³, both figures including contingent resources.8

Danish upstream oil and gas activities are regulated through a number of different acts, statutory orders and guidelines.

The main act regulating the Danish upstream oil and gas activities is the Danish Subsoil Act9 (DSA), which is a framework act. The DSA is supplemented by, inter alia, the Danish Continental Shelf Act10 (CSA) and the Danish Pipeline Act11 (DPA). These and other main acts and their key provisions, as well as the most relevant statutory orders, are set out in overview in the following sections.

The DSA sets out the basic legal framework for the exploration and exploitation activities concerning raw materials and hydrocarbons in the Danish subsoil and on the Danish continental shelf. Several of the provisions in the DSA implement EU directives.12 The DSA is based on the view that the exploration for and exploitation of Denmark's raw materials covered by the act require comprehensive societal management.

The DSA covers prospecting, exploration and exploitation of hydrocarbons and any other use of the subsoil.13 All reservoirs of raw materials including hydrocarbons covered by the act belong to the Danish state.14

Consequently, initiation of all major activities, such as prospecting, exploration and exploitation requires a separate licence granted by the Danish Minister for Climate, Energy and Utilities15 (or the DEA pursuant to delegation).16 In respect of the relevant European Union law, this allows the Danish government to make societal considerations, for example, and ensure accommodation of such considerations through specific terms in the licences.

Prior to the North Sea Agreement 2020, licences for the exploration and exploitation of oil and gas have been granted through licensing rounds, the open-door procedure, mini-rounds or the neighbour-block procedure. In the future, the number of procedures are reduced to the latter two. Historically, the preferred procedure has been licensing rounds. Since 1983, areas in the North Sea have been offered to interested companies in a total of eight licensing rounds; however, the eighth licensing round has been cancelled as a result of the North Sea Agreement 2020.

A licence is granted on the basis of a model licence with supporting documents containing detailed terms and conditions. A licence is considered private property in Denmark and is governed by Danish law. A transfer of a licence is, however, inter alia, subject to prior approval from the DEA; see further in Section V.

To obtain a licence to initiate exploration of and extraction from the subsoil as referred to in the DSA, a fee of 25,000 Danish kroner is payable.17 Expenses borne by the authorities in relation to licensing activities under the DSA or in relation to the other activities governed by the DSA, CSA or DPA must be reimbursed by the relevant party.18 Additionally, a licensee is obliged free of charge to submit samples and other information obtained in the exercise of activities covered by the DSA to the DEA and to the Geological Survey of Denmark and Greenland (GEUS).19

The CSA is based on the UN Convention on the Continental Shelf.20 The purpose of the act is the creation of an elaborate Danish administrative basis of the sovereignty over mineral deposits, etc., pursuant to the Convention on the Continental Shelf.

Under the CSA and in accordance with the requirements set out in the DSA, exploitation or exploration of natural resources on the Danish continental shelf can take place only with a licence awarded by the Danish state.21

Additionally, the CSA specifically requires a permit for the establishment of power lines and pipelines for transportation of hydrocarbons in Danish territorial waters and on the Danish continental shelf.22

The purpose of the DPA is to improve the recovery of crude oil and condensate in the fields in the Danish part of the North Sea and to reduce the environmental impact of transportation and landing. Under the DPA, the owner, currently Danish Oil Pipe A/S23 (a subsidiary of Ørsted A/S), operates the pipeline on the Danish continental shelf from the Gorm field to Fredericia as well as separation facilities.24 Any party recovering liquid hydrocarbons in the Danish part of the North Sea is obliged to connect the field facility to the pipeline and use it to transport the crude oil and condensate intended for refining or marketing in Denmark.25 This obligation can be exempted by the relevant Minister if the connection to the pipeline is considered uneconomical or inconvenient.26 In practice, the Minister's powers under the DPA are carried out by the DEA.27 The DPA also governs the users' payment of the costs of capital for establishing the facilities as well as operating costs deriving from the use hereof.28

Turning to access to the upstream natural gas pipeline network, everyone may against payment be granted access to upstream pipelines and upstream systems (e.g., pipelines operated or constructed as a part of an oil or gas production along with the technical facilities related hereto) provided that they meet the third-party access requirements.29

In 2022, a draft bill was submitted for public consultation to amend the DPA, in particular to adjust the existing pipelines in the North Sea to the current situation with declining production, and subsequently to decommission the pipelines when the exploitation activities are fully phased out.30 The draft bill has not yet been submitted to the Danish Parliament.

Regulation on safety and protection of the environment for upstream oil and gas activities is primarily set out in the Offshore Safety Act,31 the Act on Protection of the Marine Environment,32 the Environmental Impact Assessment Act,33 the Statutory Order on Offshore Impact Assessment (Statutory Order on OIA)34 and the Statutory Order on Safety Zones and Zones for the Observance of Order and the Prevention of Danger.35

The purpose of the Offshore Safety Act is to promote a high level of health and safety offshore in line with society's technical and social development. The act sets out a framework within which the market participants themselves may solve health and safety issues arising.36 Under the act, licensees must ensure that health and safety risks associated with offshore oil and gas activities are identified, assessed and reduced as much as reasonably possible.37

The Act on Protection of the Marine Environment contributes to the protection of nature and the environment in order for society to develop on a sustainable basis respecting human conditions of life and protecting vegetation and animal life.

The Environmental Impact Assessment Act and the Statutory Order on OIA concern environmental impact assessments, appropriate assessments regarding international nature conservation areas and protection of certain species in Danish territorial waters, in the Danish exclusive economic zone and on the Danish continental shelf. Certain projects related to the DSA, CSA and DPA (e.g., the production of oil) may only be initiated after an environmental impact assessment and certain other impact assessments have been carried out.

Under the Statutory Order on Safety Zones and Zones for the Observance of Order and the Prevention of Danger, fixed installations, drilling rigs, drilling ships, etc., used for or in connection with exploration or extraction of raw materials on the Danish continental shelf must be surrounded by a safety zone.38

Taxation of the upstream oil and gas field is regulated in the Act on Taxation of Income Originating from Production of Hydrocarbons in Denmark (the Hydrocarbon Tax Act)39 and in the Act on the Assessment and Collection of Taxes in connection with Production of Hydrocarbons (Act on Assessment and Collection).40

See Section VI for further information on the taxation schemes for upstream oil and gas activities.

The DEA is an agency under the Ministry of Climate, Energy and Utilities and is, inter alia, responsible for matters relating to energy supply and consumption.41 The DEA is responsible for the entire chain of tasks concerning energy production and supply, transportation and consumption, including energy efficiency and savings. Additionally, the DEA is responsible for the Danish national CO₂ targets and initiatives to limit emissions of greenhouse gases. The power to award licences for exploration and exploitation of oil and gas is not among the DEA's powers; it rests with the Minister.42

In addition to the DEA, the Danish Utility Regulator (DUR) has a supervisory and appeal function in the energy sector.43 The DUR's tasks are set out in the acts regulating the supply of electricity, natural gas and district heating. The director of the DUR is formally appointed by the Minister for Climate, Energy and Utilities, but the Minister has no powers of instruction in relation to the DUR's director or staff. Accordingly, the DUR is fully independent of the government and its personnel cannot seek or receive instructions from anyone in the performance of their duties and shall perform their duties with impartiality.44

Disputes regarding access to the upstream gas pipelines and fees and prices connected hereto are referred to the DUR with recourse to the Danish Energy Board of Appeal.45

Besides the New York Convention,46 which has been ratified by Denmark,47 there are no other significant conventions or bilateral agreements specifically relevant to litigation in exploration or the production of oil and gas. Reference is made to the Act on Administration of Justice48 and the Danish Arbitration Act.49

Under the Hydrocarbon Tax Act, foreign persons and companies carrying out hydrocarbon activities in areas fully or partly subject to Danish sovereignty are subject to taxation in Denmark on the income from the activity from the point in time when the activity commences. If Denmark has entered into a double taxation treaty with the country where the foreign company is resident for tax purposes, the treaty may, however, modify the Danish tax liability.

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