What's in a name, they ask. Well, in DONG Energy's case – basically everything. It stands for Danish Oil and Natural Gas. But last week, DONG declared it no longer considers oil and gas to be a “long term strategic commitment.”
The energy giant, which is the world’s largest offshore developer of wind energy, was set up four decades ago to manage Denmark’s North Sea oilfields. It’s thought to be worth up to 14 billion Danish crowns ($2.05bn).
In a statement it said, “DONG Energy confirms that it is reviewing strategic options regarding the future of the oil & gas business, and that J.P. Morgan has been engaged to conduct a preliminary market assessment. However, DONG Energy has not made a decision to divest the oil & gas business.”
Divesting its oil assets would leave the company to solely focus on wind power instead. It is already the biggest wind farm operator in the UK. This side of the business has been the company’s biggest contributor to profits in 2016 Q1-2 – 42% of its earning to be precise.
It comes in the same week that renewables overtook coal to become the world’s largest installed power source for the first time. According to the International Energy Agency, around 153 gigawatts of renewable power capacity was installed last year which is, as The Telegraph points out,“more than the total generation capacity of Canada.”
If it does decide to sell, it will find significant competition with many billions of dollars of oil and gas assets are already on the market, and many in the North Sea itself. The high costs of operating in this area combined with the continued pressure on prices have been too much to bear for some producers.
DONG could return to a previous negotiation held with Maersk last year over the sale of its oil and gas business,which broke down when the two couldn’t agree a price. Analysts say it isn’t ‘less likely that Mearsk could acquire it’ but naturally when asked for comment last week, Maersk remained tight-lipped, saying, “We consider suitable options for growth on a case-by-case basis.” Here’s hoping in a few short weeks, the benefits of investing more in oil will become an easy choice.
Towards 2020 DONG is committed to installing a number of large offshore wind farms in the UK and in Germany. Once complete capacity will increase 6.7gigawatts – that’s basically what 17m Europeans use in electricity. Anders Lindberg, Senior VP for the construction of wind farms at DONG said, “In the space of only a few years offshore wind has evolved from being a niche technology to being recognised as a reliable and clean energy source supplying power on utility scale and playing an important role in the green transformation of the energy sector.”