Norwegian oil & gas firm Equinor has closed a deal to sell half of its interest in two US offshore wind leases to UK peer BP for $1.1bn, in a deal that marks a dramatic entry for the latter in the global market for wind at sea.

The two companies are also establishing a strategic partnership for further growth off the US.

Equinor currently holds 100% in both projects – Empire Wind off New York State, and Beacon Wind off Massachusetts. The Norwegian company will remain operator of the projects through the development, construction and operations phases, but anticipates that the wind farms will be equally staffed after a period of time.

Equinor said it will look at further opportunities with BP in the US both for bottom-fixed and floating offshore wind, and leverage relevant expertise to jointly grow in scale in a market it said is forecast to grow to 600-800GW globally by 2050.

“We look forward to working with BP who share our strong ambition to grow in renewable energy,” Equinor chief executive Eldar Sætre said.

“Our partnership underlines both companies’ strong commitment to accelerate the energy transition and combining our strengths will enable us to grow a profitable offshore wind business together in the US.”

Towards 50GW of green power at BP

BP CEO Bernard Looney said the deal is an important early step in the company’s new strategy to truly become an integrated energy company.

"Offshore wind is growing at around 20% a year globally and is recognised as being a core part of meeting the world's need to limit emissions," Looney said.

“Equinor is a recognised sector leader and this partnership builds on a long history between our two companies. It will play a vital role in allowing us to deliver our aim of rapidly scaling up our renewable energy capacity, and in doing so help deliver the energy the world wants and needs.”

Clarksons hailed the announcement as the most important news of the day for renewables.

"BP is a colossal company with a $69bn value (market cap) and with enormous resources in the US (where it produced 400,000 barrels of oil per day in 2019) and around the world, with over a million barrels of oil per day produced in 2019," the London-based shipping, offshore and energy research provider said in a comment.

"If the announcement in August was the birth of BP as a renewables major, today it is taking its first steps."

The US offshore deal with Equinor comes a month after BP announced a new strategy to increase its low carbon investment 10-fold to about $5bn per year, with the target to boost its renewable generating capacity to around 50GW by 2030 from a mere 2.5GW in 2019.

The partnership will "leverage BP's trading expertise and onshore wind experience with Equinor’s sector-leading track record in offshore wind to deliver value for our shareholders," said Dev Sanyal, executive vice president for gas and low carbon energy at BP:

"We look forward to working with Equinor and together exploring further opportunities in the fast-growing US wind market.”

Powering 2 million US homes

Empire wind is located at 15-30 miles southeast of Long Island, at water depths of 65-131 feet, and has a potential installed capacity of more than 2GW. The Norwegian company bought the lease at a 2017 auction.

First power from the array's first phase is expected in the mid-2020s, while phase 2 is preparing for upcoming solicitations, BP said.

Beacon Wind is located at 60 miles east of Montauk Point and 20 miles south of Nantucket. It has a capacity to produce more than 2.4GW of electricity, and was acquired in a 2019 lease auction by Equinor. Beacon Wind will also be developed for future solicitation opportunities and will begin a review process to secure all necessary permits for the project, according to BP.

Equinor expects to use wind turbines greater than 10MW at both sites.

Each of the wind projects will be able to power more than 1 million homes.

Aggressive growth strategy

“This transaction with BP demonstrates Equinor’s ability to create value from developing offshore wind projects,” Equinor’s executive vice president for New Energy Solutions in Equinor, Pål Eitrheim. said

“Over the past decade Equinor has built world-class technical expertise in offshore wind. This has enabled us to access and high-grade wind acreage, resulting in a material, high-quality project pipeline.”

He added that bringing in new partners allows the company to fund further growth.

Equinor’s sale of half of the two large US projects follows a strategy employed by Danish offshore wind champion Orsted, which at some point in the development of its projects at sea usually sells off 25% or 50% of the project to fund an aggressive growth strategy.

Equinor aims to grow its renewables capacity to 4-6GW by 2026 and 12-16GW by 2035, and has recently said it expects to accelerate these ambitions. The company has established the North and Baltic Seas in Europe and the US as its core areas to build scale, while also securing growth options in other selected offshore wind markets.

BP’s purchase of the stakes in Empire Wind and Beacon Wind has an effective date of 1 January 2020 and is expected to close in early 2021, subject to customary conditions including purchase price adjustments and authority approval.

UPDATES to add research comment

Wind

Oil giant BP in $1bn offshore wind debut after US deal with Equinor