Maersk Oil’s agreement with the government of Denmark to rebuild the Tyra oil field in the North Sea last week was hailed as a victory. But industry bodies warn that the deal could hurt Danish exporters, as part of the funding comes from cutting support for smaller businesses.

After months of negotiations, Maersk Oil has, on behalf of the Danish Underground Consortium (DUC), reached an agreement with the Danish government to progress with a full redevelopment plan for the Tyra facilities.

Located 225 km west of the Danish town of Esbjerg, Tyra has since 1984 been at the centre of Denmark’s national energy infrastructure, processing 90% of the country’s gas production. But the platforms have sunk by five metres over the last three decades, and are now in dire need of reconstruction.

As part of the new agreement, Maersk has committed to cover the estimated cost of DKK30bn (US$4.4bn) to rebuild the facilities. In return, taxes on oil and gas will be lowered between 2017 and 2025.

While the deal will “facilitate future oil and gas investments in the Danish North Sea and protect industry jobs in Denmark,” according to Maersk, it raises concern over the SME export support that will be cut to provide the tax relief.

“It’s a different type of companies that will pay the price for this agreement. It will hit exporting companies, especially entrepreneurs and SMEs, which is unfortunate,” Jacob Ravn, head of tax policy at the Confederation of Danish Enterprise, tells GTR.

One way in which the Danish government will fund the Maersk tax discount is by ending a special loan scheme in which exporters can get an interest-free loan from the government, equivalent to the amount the business has paid in advance VAT. Closing the scheme would limit the liquidity of small and midsize Danish companies, who often struggle finding credit elsewhere, Ravn says.

“We hear from some companies, small businesses in particular, that they are totally dependent on this scheme to export. So one could fear that some of them are forced to close shop when the scheme doesn’t exist anymore,” he says.


Danish ECA to pay dividend

The Maersk tax discount will also be partially financed via two Danish funds, the Growth Fund and the country’s export credit agency EKF, which are required to pay parts of their annual profits as dividend to the Danish state going forward.

Specifically, EKF will contribute approximately DKK1bn (US$145mn) until 2020, after which the amount will be reduced to DKK100mn a year until 2025.

EKF says in a statement that the requirement comes “after several years of good results for EKF”, and that the payment of dividend will not affect its ability to finance Danish exporters and their customers.

“We only find it natural for our owners to look to EKF, requiring us to contribute to the national budgets after several years of good results,” says Anette Eberhard, CEO at EKF. “We are not planning to limit our capacity as a result of the agreement, and we expect to be able to provide exactly the same service to Danish companies as we used to.”

At the Confederation of Danish Enterprise, Ravn calls EKF’s statement “counter-intuitive”, arguing that in the longer run, the dividend requirements could have some impact on EKF’s capacity.

“If you pull money out of a system, it has to come from somewhere else,” he says. “Right now EKF may be in a good financial situation, but it’s a revolving fund, it does not receive any money from the outside. So in the good years, you build up capital, which you can draw on in the bad years. So they may have the money right now, but the question is whether the fund will then have enough to draw on in the future.”

While EKF says it will “take special care” to prevent the dividend requirement from affecting its service and products, it may still be too early to make any predictions in this regard.

But what the industry bodies, the Danish government and Maersk alike do agree on is that the redevelopment of Tyra will bring more jobs, investments and tax revenues to the country – which is good news for the Danish economy.

“We welcome a North Sea deal, as it will have a positive impact on businesses all over Denmark, although we would have liked the funding to come from somewhere else,” Ravn says.

Maersk Oil will now start issuing tenders and progress engineering work towards detailed plans in preparation of a final investment decision, which is expected by end 2017. Production from the field is expected to shut in December 2019 and restart in March 2022.

The Tyra field is operated by Maersk Oil on behalf of the DUC, a partnership between A.P. Moller-Maersk (31.2%), Shell (36.8%), Nordsøfonden (20%) and Chevron (12.0%).