![]()
The world of energy is changing. With society’s expectations of a strong political and industrial response to the threat of climate change, and renewable technologies becoming more attractive from a financial standpoint, the oil and gas industry finds itself examining where, and how, it will fit into the future mix. That examination, and the discussion around the energy mix, often pits oil and gas as a competitor with renewables, or an outright opponent, but the two sides may have a lot to offer each other.
Offshore wind power is one renewable resource that is on the verge of being a massive industry. In its 2019 outlook on offshore wind, the International Energy Agency (IEA) estimated that global offshore wind capacity is set to increase by 15-fold over the next 2 decades, turning it into a $1.0-trillion business. While it only accounts for 0.3% of global power generation today, a number of analysts have pointed out its potential. Several European countries (the UK, Denmark, and Germany) have set policy targets for offshore wind projects, and projects are under development in southeast Asian countries such as Korea and Vietnam.
Some operators have begun moving into the wind space. Shell won a pair of massive seabed leases last year to develop offshore wind projects off the coasts of Massachusetts and New Jersey in the US, and it is in a 50–50 venture with European utility company Nuon to build a 36-turbine wind farm in the Dutch sector of the North Sea. In July, Equinor won a bid to develop the Empire Wind farm over 80,000 acres offshore New York.
While much of the focus for offshore wind is on generating electricity for municipalities, it could also serve as a complement to conventional oil and gas projects, primarily through platform electrification.
According to Wood MacKenzie, approximately 5% of offshore wellhead production globally—more than 1.7 million BOE/D—is used as fuel to power platforms, reducing sales volumes and producing emissions of around 200 million tonnes of CO2 each year, the equivalent of the total CO2 emissions of Vietnam. In a world where carbon pricing may become more commonplace, renewables offer potential long-term cost savings.
David Linden, director of power and renewables consulting at Wood Mackenzie, said that offshore wind platforms offer numerous possibilities.
“It is a different range of opportunities, whether it’s onshore or offshore, and other areas being looked at as well, the concepts being developed. If the industry thinks about all those different options—and there should certainly be many different ways you can make this happen—it’s just a question of what is sensible to your platform,” Linden said.
The Economics of Wind Power
Any push into the renewable space will bring forth some discussion of economic feasibility, and right now the numbers look good for wind power. According to a report from BloombergNEF released in October, global benchmark prices for offshore wind have dropped 32% in the past year and 12% in the past 6 months. Global benchmark prices hit $78/MWh for the second half of 2019, driven primarily by lower equipment costs, but US developers are bidding closer to, or even surpassing, that total.
Site News