Oil giant BP could be set for a smoother passage into UK offshore wind than most after winning two lease areas in the Irish Sea that clean energy chief Dev Sanyal said are all about “location, location, location”.

Sanyal, BP’s executive vice president for gas and low carbon energy, said the sites it will advance in a 50/50 joint venture with EnBW are “highly advantaged”, citing a string of pluses that range from relatively shallow, near-shore locations to reduced headaches from bird issues compared to projects in the North Sea.

“It’s the old cliché of location, location, location,” Sanyal told Recharge after BP and EnBW were named preferred bidders by the Crown Estate for the two projects that could yield up to 3GW of capacity.

The sites, one of 300 square km and 500 sq km, are adjacent to each other 35-40km off northwest England and north Wales.

Sanyal said the sites offer good wind resources and lower barriers to development compared to others off the UK. “It’s a gigantic resource base in an underdeveloped area,” he added, flagging the potential for shared synergies across the two projects, and lower transmission infrastructure costs.

The BP chief said it and EnBW were “highly confident” of securing environmental consent, citing reduced conflict with migrating bird populations compared to North Sea wind farms, which have faced permitting delays because of the issue.

The oil supermajor has been working with EnBW, the German utility with a track record in offshore wind in Germany, for 15 months in the lead-up to the Round 4 process. “We’re very pleased with the way it’s come together,” he said.

BP is already working with fellow oil & gas group Equinor in US offshore wind. “This is not different from upstream [oil and gas],” said Sanyal. “You have different partners in different geographies.”

Highest bid in Round 4

The BP/EnBW bid team expects to pay four annual payments of £231m ($317m) to the Crown Estate on each lease in the run-up to a final investment decision, and aims to get them not service within seven years.

That is by some margin the highest of any bidder that was successful in the auction, run for the first time under a system of bidding for ‘option fees’ that has proved controversial in the industry.

Sanyal said: “It’s a large number, but it’s also about the resource quality out there.

“Yes, there’s a cost, but the [investment] cost of offshore wind is going to be higher than [other renewables such as onshore wind and solar].”

Sanyal added: “It’s a difficult business, it’s capital intensive, but the real story is how quickly you bring this to market [and drive efficiency of projects].”

Sanyal declined to put a final investment cost on building the two projects, beyond saying it would be “many billions of dollars”.

But the BP executive said it was important to secure positions in a “trillion-dollar industry that is the fastest growing source of energy worldwide”.

Sanyal also pointed to the 60-year leases attached to the projects that he claimed were the longest yet seen in the industry. “What we see in the US is 25 years, here 60 years. It’s highly attractive.”

Sanyal insisted the oil group had stuck rigidly to its “discipline” of securing at least 8-10% returns from the projects, and would be in a strong position to add value thanks to its capabilities in areas such as project delivery and engineering.

“We’ve got a lot of skills we can access. We don’t start from scratch,” he said.

The UK entry adds to BP’s recent offshore wind partnership with Equinor in the US, meaning the supermajor has gone from a standing start to 7.4GW of gross capacity under its wing.

Sanyal did not rule out moves into further markets – if they meet its criteria. “If I and my teams see value, we will prosecute it.”

Offshore wind and solar PV have emerged as the two key planks of BP’s renewables plans that are among the most ambitious of any oil major. CEO Bernard Looney has set a goal of 50GW gross renewable capacity in operation by 2030.

Wind

'Location, location, location': BP renewables chief hails Irish Sea upsides of UK offshore wind debut