DONG Energy Confirms Exit From Oil and Gas

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By MarEx 2016-11-08 19:55:43

Copenhagen-based DONG Energy confirmed Tuesday that it will exit offshore oil and gas. Instead, the firm will focus on its growing portfolio of offshore wind and renewables. 

“We have decided to initiate a process with the aim of ultimately exiting from our oil and gas business. This should be seen in the context of DONG Energy’s strategic transformation towards becoming a global leader in renewables and a wish to ensure the best possible long-term development opportunities for our oil and gas business,” said CEO and President Henrik Poulsen. However, he added that “there can be no assurance as to the outcome or the timing of the completion of the process.”

The firm's profitability improved markedly in the third quarter thanks to growth in its wind power business and to a steep reduction in expenditures in its oil and gas division. It also benefited from a one-time $200 million in earnings from the divestment of its gas distribution grid in Denmark. 

DONG has seven wind farms totaling 4.4 GW under construction and more on the way for the next decade. It has also inaugurated a biomass-fired heating plant in the city of Aarhus, which will supply 225,000 residents with carbon-neutral heating. Three similar plants are under way. 

DONG (originally Danish Oil and Natural Gas) has its roots in O&G transport and distribution. It began operating its first offshore field in 1998, and it bought out Statoil's Danish E&P assets in 2002. It has been a leader in wind power for over a decade, especially after its merger with five other European energy firms in 2006. 

European offshore wind has been growing more cost-competitive as turbine manufacturers and farm developers take advantage of new economies of scale. Magnus Hall, CEO of Vattenfall, recently told Recharge News that his firm tendered a bid for a new wind farm off Sweden at seven cents per kWh wholesale, about on par with coal. 

DONG is betting on a cost advantage as well. “Offshore is a reliable and increasingly cheap source of energy, with no lasting harm to the environment,” said Benj Sykes, VP of DONG Energy Wind Power, speaking to the Guardian last month. “It will soon be simply unbeatable.”