Where will investors in offshore oil and gas look as the energy transition starts to take hold?
While the oil and gas sector remains the largest component of the offshore supply chain, we expect the offshore wind market to become more attractive for traditional oil and gas players.
There is limited crossover today, but first movers have gone with the wind and more will soon follow. As interest and investment in offshore wind grow, investment in offshore oil and gas is likely to stabilize, narrowing the gap between the two sectors. Despite a 29 percentdrop in the average global capex per megawatt a measure of the investment per megawatt generated we forecast in a new reportthat more than $200 billion in capex will be deployed in offshore wind between 2020 and 2025.
How do offshore oil and gas and offshore wind compare for investors? Here are three factors to consider.
The transparency and certainty of offshore wind arehigh because deployment is largely tied to government incentives. In fact, 82 percentof the forecast offshore capacity to 2025 has been awarded funding under a support scheme or is in the more advanced stages of development.
Compare that to global offshore upstream oil and gas capex, where the current trend for short-cycle projects lowers the visibility and certainty of investment outlooks beyond 2022.
Offshore wind projects are changing; the offshore wind supply chain will have to change with it. The number of project interfaces the supply deals associated with a project is both broadening and decreasing, while the size of projects and contracts is growing.
Project sizes and clusters of projects will increase by 63 percentby 2025. To win these larger deals, smaller supply chain players are consolidated to create companies capable of capturing the larger work packages. Moreover, the larger work packages are also attracting the larger O&G players to the offshore wind industry.
Meanwhile, changes in project characteristics (scale, complexity, water depth and distance from shore) impactthe way capex is distributed along the value chain and intensifyrequirements forequipment and production capabilities.
Investors follow the money. That was the lure of U.S. tight oil, which offeredaverage project returns of around 30 percent. And even at $55-$60per barrel of oil, most new offshore oil and gas projects are making double-digit-percentreturns. Sowhy would an investor instead choose an offshore wind project with single-digit returns?
Theres more work to do to make renewables projects attractive, even economic, to mainstream investors. Butany investment in the oil and gas sector is now subject to what's termed energy transition risk,which encompasses falling demand for oil, the potential cost of the carbon intensity of assetsand other variables.
Theres also a real possibility that both upstream project returns and renewables project returns will evolve, taking into account the changing cost of capital, government subsidies and technology development. In the context of the energy transition, we expect offshore wind to become an attractive low-risk investment, particularly to carbon-heavy portfolios.
Offshore wind isnt a deepwater game yet. Today most activity is clustered on the offshore shelves around Europe, China and South Asia, with North America catching up.
Whats attractedthe attention of many oil and gas investors is the large potential of offshore wind and the fact that the wind developments are sited in mature, well-established upstream areas they already know well.
Its conceivable that there will be a point of convergence in those regions in the 2020s where offshore wind investment will match oil and gas.
Sren Lassen is asenior offshore wind analystandMhairidh Evans isa principal upstream supply chain analyst at Wood Mackenzie.
Lassen's latest report,The 200bn prize in offshore wind, is available here.
Read the original:
- Oil Companies BP and Total Win Offshore Wind Leases in Britain - The New York Times - February 15th, 2021
- New legislation would mandate shift to offshore wind production - KTVU San Francisco - February 15th, 2021
- Is This The Best Way For Offshore Producers To Raise Production - OilPrice.com - February 15th, 2021
- Offshore Wind Positioned To Take Off Under Biden - JD Supra - February 15th, 2021
- State bill introduced to jumpstart offshore wind on Central Coast - KSBY San Luis Obispo News - February 15th, 2021
- Offshore Air Handling Units Market Report 2016 Includes Growth by Global with Industry Analysis, Size, Share, Trends, Key Vendors, Drivers and... - February 15th, 2021
- Offshore wind expert Ohleth named executive director at SIOW - ROI-NJ.com - February 15th, 2021
- Construction of World's Largest Offshore Wind Farm Stays On Track - Offshore WIND - February 15th, 2021
- Offshore yuan, CNH, gains further, to its highest since mid-2018 - ForexLive - February 15th, 2021
- rsted and PGE joint venture to develop offshore wind projects in Poland - Power Technology - February 15th, 2021
- South Korea to Build World's Largest Offshore Wind Farm by 2030 - The Deep Dive - February 15th, 2021
- Two young kkp found dead on offshore islands - Stuff.co.nz - February 15th, 2021
- Crowley Announces Offshore Wind Energy Partnership with Watco gCaptain - gcaptain.com - February 15th, 2021
- SSE Renewables and ODE Team Up Offshore UK and Ireland - Offshore WIND - February 15th, 2021
- New offshore wind training facility could bring a boost to Salisbury's economy - 47abc - WMDT - February 15th, 2021
- Dominion files plans with federal regulators for 2.6 GW offshore wind project, largest in US to date - Utility Dive - December 22nd, 2020
- Federal stimulus includes wind, solar tax credit extensions, adds first US offshore wind tax credit - Utility Dive - December 22nd, 2020
- Eni and PTTEP Awarded Third Block Offshore UAE - Journal of Petroleum Technology - December 22nd, 2020
- NOV to upgrade Wind Orca's crane | Offshore - Offshore Oil and Gas Magazine - December 22nd, 2020
- GE's huge wind turbines to power 'world's biggest offshore wind farm' | TheHill - The Hill - December 22nd, 2020
- Why Offshore Wind and Energy Giants Are Chasing Off-Grid Green Hydrogen - Greentech Media News - December 22nd, 2020
- Study 'to help Scots businesses win global offshore work' - reNEWS - December 22nd, 2020
- GE's giant turbines will power final phase of the 'world's biggest offshore wind farm' - CNBC - December 22nd, 2020
- Iberdrola to acquire stake in offshore wind projects developer Sea Wind - Power Technology - December 22nd, 2020
- Edison Chouest Offshore to Install First Battery Pack on a Jones Act PSV - gcaptain.com - December 22nd, 2020
- Heerema and Safeway Team Up Offshore Taiwan - Offshore WIND - December 22nd, 2020
- Rossi relishing new venture into offshore sailing - International Sailing Federation - December 22nd, 2020
- Scorpio Bulkers Takes $500M Writedown to Shift to Offshore Wind Sector - The Maritime Executive - December 22nd, 2020
- Offshore wind in its sails - WorkBoat - December 22nd, 2020
- Dominion Gathers Jones Act Wind Turbine Installation Vessel Team - Offshore WIND - December 22nd, 2020
- Scottish policy 'a vote of confidence' in offshore wind and green hydrogen - Riviera Maritime Media - December 22nd, 2020
- Japan aims to be world's No. 3 offshore wind power producer in 2040 - The Japan Times - December 22nd, 2020
- North Sea Statfjord st partners sanction further wells - Offshore Oil and Gas Magazine - December 22nd, 2020
- Boohoo owner tells MPs he could easily 'take business offshore' - The Guardian - December 22nd, 2020
- Sale of the offshore construction & cable-lay vessel Connector - PRNewswire - December 5th, 2020
- Coalition of Florida businesses call on Congress to oppose offshore finfish farming - WMNF - WMNF - December 5th, 2020
- US Wind Names Offshore Wind Pioneer Jeff Grybowski as CEO - Business Wire - December 5th, 2020
- With offshore wind, Virginia hopes a 21st-century manufacturing boom will offset a hefty price tag - Virginia Mercury - December 5th, 2020
- An offshore wind farm with the ability to power one million households' is fully up and running - CNBC - December 5th, 2020
- 'Truly incredible': Missing Florida boater found alive clinging to capsized vessel 86 miles offshore - USA TODAY - December 5th, 2020
- GLDD plans to build offshore wind rock installation vessel - Marine Log - December 5th, 2020
- Global Offshore Wind Cable Market 2020-2024: COVID-19 Analysis, Drivers, Restraints, Opportunities, and Threats - Technavio - Business Wire - December 5th, 2020
- US Offshore Wind Industry Getting First Subsea Rock Installation Vessel - Offshore WIND - December 5th, 2020
- EGEB: US offshore wind workers to get virtual reality training in Maryland - Electrek - December 5th, 2020
- Boskalis Boosts Its Offshore Wind Fleet with Boka Tiamat - Offshore WIND - December 5th, 2020
- Touting Potential Economic Benefits, Crescent City Harbor District Commissions Offshore Wind Energy Study - Lost Coast Outpost - December 5th, 2020
- RWE eyes 'sizeable positions' in East Asian and US offshore wind markets - Recharge - December 5th, 2020
- RWE plans to produce hydrogen directly at pilot offshore wind turbines in Germany - Recharge - December 5th, 2020
- Dry conditions and warmer daytime highs remain in the forecast as offshore flow continues - KSBY San Luis Obispo News - December 5th, 2020
- The Global Offshore Wind Turbine Market is expected to grow by 54975 MT during 2020-2024 progressing at a CAGR of 24% during the forecast period -... - December 5th, 2020
- Breezy offshore flow will keep daytime highs above average Tuesday - KSBY San Luis Obispo News - December 5th, 2020
- What are offshore renewables? And how do they work? - Euronews - December 5th, 2020
- Australia looks offshore with overseas students' return uncertain - Times Higher Education (THE) - December 5th, 2020
- Construction of Les Alizs Begins - Offshore WIND - December 5th, 2020
- Japan Launches First Fixed Bottom Offshore Wind Auction - Offshore WIND - December 5th, 2020
- 1400 GW of offshore wind achievable by 2050 | theenergyst.com - The Energyst - December 5th, 2020
- Orange Targets Offshore Wind with New Cable Vessel - Offshore WIND - December 5th, 2020
- Douglas Todd: Offshore investor of $45 million in Vancouver housing claims fraud - Vancouver Sun - December 5th, 2020
- Vestas to Acquire Full Control Of Offshore Turbine Business - Greentech Media News - October 29th, 2020
- Floating Offshore Wind Turbines Set to Make Inroads in U.S. - Scientific American - October 29th, 2020
- Global Offshore Wind Pipeline Up Nearly 50 Per Cent in 2020 - RenewableUK - Offshore WIND - October 29th, 2020
- Global Offshore Drilling Market 2020-2024: Market is Poised to Grow by $11.34 Billion - ResearchAndMarkets.com - Business Wire - October 29th, 2020
- Scorpio Bulkers is Selling Off its Fleet and Shifting to Offshore Wind - The Maritime Executive - October 29th, 2020
- Climate crisis: Scotland announces target to power 8 million homes by offshore wind over next 10 years - The Independent - October 29th, 2020
- Offshore Gas Pipeline Market Expected to Witness High Growth over the Forecast Period 2020 2025 | Fugro, Atteris, Sapura, Subsea 7 - Global Analytics... - October 29th, 2020
- Floating Foundations: The Future of Offshore Wind | Liskow & Lewis - JD Supra - October 29th, 2020
- Ferrovial to construct DemoSATH floating offshore wind platform - Offshore Oil and Gas Magazine - October 29th, 2020
- Global Offshore Oil and Gas Communications Market 2020-2026 | Covering Products, Financial Information, Developments by ABB Ltd., Baker Hughes... - October 29th, 2020
- Northern California offshore transmission line could fast-track wind farms powering SF Bay - American Journal of Transportation - October 29th, 2020
- Global Offshore ROV Market-With Geographic Segmentation, Statistical Forecast and Competitive Landscape Research upto 2026 - Eurowire - October 29th, 2020
- BP hints at near future moves into offshore wind and hydrogen - RenewEconomy - October 29th, 2020
- Offshore wind guide to recruit diverse workforce - reNEWS - October 29th, 2020
- Powerful offshore winds hit northern and southern California - KSBY San Luis Obispo News - October 29th, 2020
- More than 150 MMbbl in prospect close to Yumna offshore Oman - Offshore Oil and Gas Magazine - October 29th, 2020
- Icebreaker offshore wind project faces more obstacles - Crain's Cleveland Business - October 29th, 2020
- Offshore Windfarm development boosted by 2 million research - GOV.UK - October 29th, 2020
- Charting the future at AWEA's Offshore WINDPOWER Virtual Summit - Into the Wind - The AWEA Blog - October 19th, 2020
- So, What Exactly Is Floating Offshore Wind? - Greentech Media News - October 19th, 2020
- IRENA: Offshore Wind Capacity to Reach 228 GW by 2030 - Offshore WIND - October 19th, 2020
- Tropical Storm Epsilon Forms And Could Become A Hurricane Offshore Later This Week - WMFE - October 19th, 2020