Times are changing in the offshore market. The global charge towards decarbonisation, fuelled by growing public environmental consciousness, is driving yet further change in our energy mix. Governments and large energy companies alike are pouring resources into clean alternatives, with offshore renewables receiving the lion’s share of investment and focus.
The Paris Agreement commits all participating nations to taking action to keep global temperature rise below two degrees centigrade. Meanwhile, governments around the world are battling to set ambitious net zero targets, whilst trying to rebalance their economies to become far more sustainable and resilient.
Likewise, the shift can be seen with the stance of some of the world’s largest energy providers and offshore majors. The Italian energy group Eni has committed to cutting its greenhouse gas emissions by 80% by 2050, and BP has gone further and committed to net zero by 2050 as it strives to “reimagine energy for people and our planet”.
While these big players are pouring investment into clean, renewable energy solutions – the sector received an estimated USD 2.6 trillion between 2010 and 2019 – investment alone cannot guarantee the clean energy projects will be a success. To achieve that, the sector must embrace cross-sectoral knowledge.
This rapidly changing market poses challenges for the offshore service providers who have supported traditional energy operations for decades. They must be prepared to adapt to the new circumstances and provide the expertise the growing global renewables industry needs. Fortunately, their decades of experience has equipped many to do just that.
The important role of offshore players in the renewables drive has been recognised at the highest level, with the UK’s Green Finance Strategy highlighting how “the UK’s expertise in the North Sea from oil and gas is now part of a growing offshore wind supply chain”.
That expertise should not be limited to the North Sea. The valuable experience service providers have gained can be applied to offshore renewable operations across the globe. Emerging markets in non-traditional energy locations are expected to be of particular significance, with the UNEP estimating that Asia is set to become the world’s leading offshore wind cluster with an estimated 60% growth by 2050.
Importantly for service providers, the role of offshore support vessels (OSVs) in the growing renewables sector does not differ much from the part they played in conventional offshore energy projects. Both wind farms and oil and gas rigs require similar services, such as seismic surveys and crew transportation, to get projects off the ground and managed properly.
Crucially, these offshore renewables projects offer consistent work for suppliers who have, at times, struggled to find work during the downturn. For example, it takes 3 to 5 years to get an offshore wind turbine constructed and providing power to the grid, thus establishing potentially lengthy contracts for service providers. Meanwhile, the parallel priority of cost savings between the oil & gas and renewables sectors is still likely to define operations.
In the long term, service providers will enjoy a constructive role as the renewables sector continues to grow in the coming years. The cyclical nature of the offshore economy has seen plenty of talent leave the sector in recent years, including experts with vital cross-sectoral knowledge that can be applied to renewables growth and, if anything, it is this which presents the greatest challenge. The push to renewables is being hindered by organisations having to recruit and train individuals to lead the clean energy revolution. Third parties, including service providers, are being approached to fill that expertise gap, with contracts now increasingly stipulating a greater level of knowledge sharing – either through data insights or secondment of supplier staff.
Data, experience and synergies
The industry must also accept that digitalisation is playing an increasingly important role in the supplier/customer relationship. Customers now expect accurate real-time reporting, significant investment in infrastructure and relevant, timely insights. This will continue to be a big driver and requirement in the offshore landscape, as data is increasingly recognised as the most valuable commodity in the decision-making process.
The International Energy Agency highlights how service providers offer “excellent large-scale project management abilities and the ability to work in difficult offshore environments”. Synergies don’t stop with expertise, with the IEA estimates that about one-third of the components in the full lifetime costs of a standard offshore wind project may have significant synergies with the offshore oil and gas sector.
The future is bright for suppliers
The decision by Norway’s USD 1 trillion wealth fund to divest from oil and gas exploration confirmed the inevitable for many industry experts: investment in clean energy is here to stay. This should inspire all service providers within the sector, including GAC, to embrace the prospect of offshore renewables with genuine enthusiasm and passion.
The chance to be at the forefront of the energy transition with skills recognised as indispensable should be the motivation that drives us to meet the challenge head on. By putting their expertise and passion behind the cause, offshore service providers can play a significant part in facilitating a decarbonised world and fighting climate change.
Herman Jorgensen is Managing Director of GAC UK and former General Manager at GAC Norway. Jorgensen is based at the company’s Grangemouth office, working alongside the company’s Finance and Human Resources functions.