- Jul 1, 2021 3:35 pm GMT
Big Oil always goes in big. It has to, if any new strategic position is to make a material impact on its massive portfolios. And offshore wind is the big new thing the European Majors are seizing upon, an ‘oven-ready’ zero-carbon technology with big growth prospects.
WHERE IS OFFSHORE WIND IN BIG-OIL NEW ENERGY STRATEGY ?
- Offshore wind (OSW) will be a core part of integrated zero-carbon portfolios, which will include carbon capture and energy storage. It will also have a central role in green hydrogen. t’s one of a number of core options where the Euro Majors are gaining exposure.
- Equinor aims to be an “offshore wind Major”, focused on being the best-in-class operator – it’s already the leading oil Major with net equity capacity of 12 GW, more than the rest put together. But the others (BP, Total & Shell) are working hard to catch up.
WHAT IS SIZE OF OPPORTUNITY IN OSW ?
- Offshore wind is niche today at 35 GW, just 6% of global wind capacity, most of which is onshore.
- Wood Mackinzie forecast global installed capacity will exceed 200 GW by 2030.
- The established markets are all in northern Europe and China, the next wave – US, elsewhere in Europe & Asia – is just opening up.
WHAT IS THE COMPARATIVE ADVANTAGE FOR OIL COMPANIES ?
- The developments fit neatly into Big Oil’s skill set in offshore development, there are operational synergies
- Majors can leverage their international footprint to access new markets, an advantage over local-focused utilities.
WHERE THEY ARE TODAY & WHERE THEY WANT TO BE TOMORROW?
- The Euro Majors’ have obvious lead over US majors; operational capacity is just 0.7 GW, 3% of the global total outside China. But they are on a mission and have secured 30% of the 9 GW that achieved final investment decisions in 2020.
- Diversifying across geographies & technologies; the Euro Majors are pushing early into floating offshore wind.
- The Euro Majors (excluding Shell) have a ambitious target for renewables, including solar and onshore wind of 125 GW by 2030
ARE EVALUATIONS TOO HIGH TO MAKE ANY PROFIT?
- Big Oil will need to clearly articulate the value proposition as it commits large capital into new energy, including offshore wind.
- Developers will have to ensure discipline on project delivery, execution, capital and operating expenditure to be profitable.
- Based on current models according to WoodMac, the single digit profits are quite possible!
- There’s very strong alignment in offshore wind that’s helping to push the transition forward. Big Oil and its competitors want more projects, and governments need to ‘feed the beast’ to help meet their net-zero targets.
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