Energy transition

Action on the Energy Transition Front

After a lot of talk of the transition, BP and Total are making bids to become major wind energy producers in the UK. Meanwhile, NOV said the offshore wind sector is becoming a big business for it too.

Sunset at BP's Cedar Creek 2 wind farm.
The Cedar Creek 2 Wind Farm.
Source: BP.

This week there have been signs companies in the oil business are actually making the transition into renewable energy.

BP has won two leases in the Irish Sea for wind farms that it said will someday supply wind for 3.4 million households in the UK, and the company now known as Total Energies also picked up a large block.

NOV’s chief executive officer said the service company expects that its equipment sales for wind will reach $200 million this year.

Based on this really early sample, the engineers benefitting from this change will have expertise in offshore construction on really large scale.

For BP, this marks its entry into the UK offshore wind business, with the adjacent leases covering 800 km2. BP and its partner, a German utility, EnBW, agreed to annual payment of £231 million per lease until they decide to make a final investment decision, according to Reuters.

In the same bidding round held by the Crown Estate—the royal family will receive 25% of the proceeds—Total Energies and an investment company, Macquarie, leased a block off the east coast of England, with the potential to generate1.5 gigawatts.

Total added Energies to its name to highlight its long-term effort to shift to alternative energy sources, reducing its oil revenues from 50 to 30% of its total over the next decade, Reuters said.

BP put in the highest bid by far in the UK offshore offering. It said its blocks offer “strong wind resources and proximity to shore.” The water there is shallow—35 to 40 m deep—within 30 km of land and near large markets in Northwest England and Wales, including Liverpool.

BP expects to be able to generate 3.4 gigawatts of power, enough to supply the homes occupied by more than 10% of the population of the UK. The sale is part of an effort to generate enough offshore wind power to supply every home in the UK.

The partners expect to earn an 8 to 10% return if they go forward with the project. BP’s timeline shows it is 4 years away from a final investment decision. Based on that schedule, it will begin supplying power in 7 years.

Building Giant Towers

NOV is already profiting from the boom in offshore wind construction and is pushing to expand onto land as well.

“By year-end, I expect that our business in this area will have doubled to more than $200 million annually, and further growth prospects are excellent as the 9.6 gigawatts of offshore wind capacity to be installed in 2021 is forecast to more than double by 2025 to more than 21 gigawatts,” said Clay Williams, NOV’s chairman and CEO, during the call.

Wind turbines were a natural extension of NOV’s offshore oil platform construction business, but Williams said the firm is looking at a range of other alternative energy opportunities for the future.

For now, NOV is benefitting from a building boom in a sector where NOV-designed vessels and equipment have been used to build the majority of the world’s installed offshore power generation, he said.

NOV has contracts to upgrade six vessels, with revenues spread over several years. It is competing to supply the equipment on these boats, each of which represent $80 million dollars’ worth of sales.

The trend is toward taller towers, longer blades, larger turbines, and bigger generators, which cover a larger area at heights where the wind blows more consistently. Williams gave analysts a short pitch on its offerings, including telescoping cranes.

NOV is developing other products to reduce the high cost of giant structures.

It has developed an automated welding method—tapered spiral welding—that it says can speed construction for half the cost. It has built a plant in Pampa, Texas to deliver on 100 orders for tower components, with more expected. NOV is also developing a unit that can be used at a construction site, limiting the number of large loads required.

And as big bidders scoop up shallow water offshore locations, NOV is working on a deepwater option.

It is competing to sell a design for a semisubmersible foundation that would support an offshore turbine. Williams said the design uses less steel than alternatives and could be fully equipped before it is towed out to its location.

Looking ahead, Williams is happy to see that one turbine maker has plans to sell a 12-megawatt turbine in 2022 that is as tall as a 50-story building, and an even bigger one 2 years later.

“There are just very few vessels that are big enough to install those things. And with a lot of them coming, the world needs a bigger fleet, and we’re pleased to play a role,” he said.