Wind’s $168B North Sea Boom Lures Oil Industry

01 May 2012

Oil service companies led by Technip SA (TEC) and Subsea 7 SA (SUBC) for the first time are working with wind energy developers in the North Sea’s 14 billion-euro ($19 billion) a year market.

The offshore engineers plan to exploit the similarities between building undersea oil installations and constructing offshore wind farms and have both established renewable energy units. Petrofac Ltd. (PFC) also offers expertise to wind developers in the North Sea, where fossil fuels first discovered in 1966 are being depleted as clean energy demand rises.

"The synergies available between offshore wind and oil and gas are most apparent in the North Sea,” said Jayesh Parmar, a London-based consultant at Baringa Partners LLP. "It makes sense here to be operating in both areas.”

The move into renewable energy comes after Britain’s oil and gas production has shrunk more than half since peaking in 1999 at about 4.5 million barrels of gas and oil equivalent a day to about 2.2 million barrels now, according to the Oil & Gas U.K. industry group. Production from Britain’s continental shelf has fallen about 6.2 percent annually in the past 23 years.

Drawing on offshore energy expertise and government mandates to raise the amount of power derived from clean energy, countries around the North Sea led by Britain plan to have 35.5 gigawatts of offshore wind projects by 2020 from 2.9 gigawatts today, according to Bloomberg New Energy Finance. The total cost of the increase will be 127 billion euros and the facilities would provide 3.2 percent of the European Union’s electricity demand.
Scotland, North Sea

Britain has about a third of the potential sites for offshore wind farms in Europe off Scotland and in the North Sea, more than any other nation.

"The offshore wind developers are now seeing the value of having the oil and gas companies getting involved,” Subsea7 Renewables Vice President Bob Dunsmore said in an interview. "They’re moving into the environment we work in.”

For a 50-turbine offshore wind installation, as much as 25 percent of the capital expenditures are services work that can easily be done by oil and gas companies, Parmar said.

As wind projects ramp up in size, the crossover with skills and equipment is growing, said Will Rowley, an analyst at the private subsea engineering group Acteon. The U.K.’s oil and gas industry employs about 440,000, according to Oil & Gas U.K.

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