Can Offshore Wind Prop Up Oils Supply Chain Through the Price Crunch? – Greentech Media News

Various streams of the energy transition and none more thanoffshore windare seen as possible routes to new, less-riskyrevenues for big oil companies and their supply chains. As the oil and gas sector faces the triple crises of the coronavirus, the resulting recession and the halving of oil prices, can power and renewables plug thegap in their finances?

Many big oil exploration companies have already announced huge spending cuts, resulting inscores of exploration projectsbeingcanceled. For oil-field contractors like Halliburton, Schlumberger and Wood (formerly the Wood Group) that leaves a substantial shortfall in their bottom line.

In Europe, offshore wind has long been seen as an opportunity for North Sea oil services companies to tap new sources of revenue. With Exxon, Shell, Total,BP and other producers cutting billions from their spending, those oil-field contractorshave a lot of ground to make up.

In the next five years alone, globaloffshore wind investment will top 200 billion ($218 billion), according to a January report by Wood Mackenzie. By 2025 there will stillbe twice as much investment in upstream oil and gas (101 billion) compared to offshore wind (45 billion), WoodMac believes, buta decade ago the difference was two orders of magnitude.

There are limited points of actual overlap in the work done by supply chain companies between fixed offshore wind and offshore oil and gas developments, said Mhairidh Evans, principal analyst forupstream supply chain research at Wood Mackenzie, who co-authored the report.

Still, the similarities that do exist alongside the rapid growth trajectory for offshore wind are drawing in many ofthe larger oil and gas service companies,such as Saipem and Subsea 7, Evans said. "When we start to think about floating wind, the overlaps increase. Offshore oil and gas service companies have the expertise on deepwater and harsh environment operations and floating structures."

Wood, headquartered in Aberdeen, Scotland, is one of the 10 largest oil services companies globally. It has been diversifying its business aggressively in recent years.In 2014, 96 percent of its revenue was from the oil and gas sector. Now mid- and upstream oil and gas make up one-third.

In addition to offshore wind, Wood is also pushing into onshore renewables. Last week the company announced $100 million worth of work building onshore wind farms in the U.S.

The events of the last two months only serve to reinforce our view that our strategy is the correct one,"Martyn Link, Wood's chief strategy officer, told GTM in an email. "Were not fully insulated from the impact of the oil price crash.But as a more diverse business, were certainly much more resilient."

Were optimistic about the offshore wind market as we can see significant capital investment being planned over the next five years in many of our priority regions," Link said.

Wood plans to play a role in all stages of an offshore windprojects lifecycle, from design and planningthrough to operations and maintenance. It's also makingmoves in other sectors, including carbon capture and storage andpower transmission.

Equinor, the Norwegian oil producer, has made an early push into floating offshore wind and sees significant overlap with its traditional businesses.The list ofcontractors for Equinor's88-megawatt Hywind Tampen floating offshore wind project includes a number of firms with an oil and gas background, including Subsea 7 and Kvaerner.

Our strategy todevelop into a broad energy company, to develop profitable oil and gas projects, and to grow our renewable business is still valid in the current downturn in the oil and gas market, an Equinor spokesperson told GTM.

This is not the oil industrys first crisis,and many oilfield service companies are still recovering from the lastprice crash.

Already, companies were looking to diversify, to balance their upstream businesses with something less directly exposed to commodity price fluctuations,be that renewables, downstream/chemicals and so on," said WoodMac's Evans.

"Another downturn,just as the service sector was getting back on its feet again,puts that into a more urgent light."

Oil services companies with the most specific crossover with offshore wind's needs will reap the most immediate rewards. But even as the gap between the two sectors narrows, offshore windwon't be enough to patch up the oil sector's triple crises on its own.

Is offshore wind the thing that will come to the oil and gas supply chains rescue? I doubt it," said Evans."But for some specific companies, it could really help falling revenues and spare capacity."

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Can Offshore Wind Prop Up Oils Supply Chain Through the Price Crunch? - Greentech Media News