Capital investment in sea-based wind power off Europe will match offshore oil & gas in the next year and eclipse it in 2022, according to new calculations from consultancy Rystad Energy, as the collapse in global crude markets takes its toll on petrogiants’ project development ambitions.
Annual spending levels on offshore wind in the Northern seas, which has hovered above $10bn a year since 2015, is expected to climb to around $13.8bn billion in 2020, to $18.2bn in 2021, and more than $22bn the following year, as capital expenditure (Capex) in offshore oil & gas “continues [its] downwards trajectory” from more than $25bn last year to less than $17bn by 2022.
“In light of the postponement of multiple FIDs [final investment decisions] on projects and lower investments in offshore oil & gas, coupled with increasing activity in the offshore wind sector, [we] expect that the two markets will reach parity as soon as next year [and] that Capex on offshore wind will surpass upstream oil & gas spending in Europe in 2022,” said Rystad Energy’s project manager for offshore wind Alexander Flotre.
“Offshore wind development in Europe is expected to flourish in the coming years as countries strive to reach their ambitious 2030 targets – and large investments will be required,” said Flotre.
“Commissioning activity is expected to increase towards 2025, and projects expected to be operational in 2023-2025 are already driving up capital expenditure in 2020. This trend will continue in the coming years.”
From an installed base just under 22GW last year, European offshore wind power capacity is set to expand to more than 53GW by 2025, constituting an annual growth rate of 16%, according to Rystad forecasts.
“While Europe’s ambitious plans for 2030 will require new tender rounds in the coming years, most of the commissioning activity towards 2025 is expected to come from projects that have already been approved,” noted Flotre
Megaprojects including Dogger Bank, Sofia and the coming phase of the Hornsea complex, along with developments in “established” markets such as the Netherlands, Germany, Belgium and Denmark are expected to contribute to the increased spending levels, while newcomers such as France and Poland will add to the growth in the 2023 to 2025 period, Rystad believes.
Flotre noted that the shift in Capex in offshore energy will underpin the transition that “many service companies” are undertaking towards focusing on offshore wind activities rather than “legacy” oil & gas businesses.
“For these players, the growth in the offshore wind market provides a well-timed cushion that softens the blow of declining investments in the traditional oilfield services sector.”
French oil giant Total has nailed its colours to the mast in recent weeks with announced plans to build a 100MW floating wind farm off Wales and taking a controlling stake in Scotland's biggest offshore wind farm, the 1GW-plus Seagreen, joining Shell, Equinor, Eni and others is accelerating their energy transition via wind-at-sea.
Big Oil faces the reality that two thirds of the value of the world’s oil and gas reserves — totalling $25trn — could be wiped out as the energy transition disrupts the entire fossil-fuel system, with profound ramifications for financial markets and geopolitics, according to a report from financial think-tank Carbon Tracker.
Estimates as to the total global power production potential of offshore wind have rocketed in recent years, as costs have been slashed and turbine technology rapidly upscaled, with the International Energy Agency forecasting late last year a 340GW build-out by 2040 and the International Renewable Energy Agency expecting a full 1TW online by mid-century.
According to the latest research from analyst group IHS Markit, worldwide construction of new offshore wind power plant is set to gear up with some 135GW of new turbines added in the coming decade en route to a 600GW market worth $1.4trn by 2050, as the industry wades out into deeper waters and heavily capitalised players, led by the oil operators, ramp up spending.