Taking into account the postponement of several final investment decisions (FIDs) on projects and lower investments in offshore oil and gas, combined with increased activity in the offshore wind sector, the energy research and business intelligence company Rystad Energy expects the two markets to reach parity as early as next year.
The oil market collapse caused by the Covid-19 pandemic is set to delay several oil and gas developments in Western Europe, putting capital spending on an ongoing downward trajectory through 2022 in the offshore sector.
Rystad Energy expect capital investment (capex) on offshore wind would exceed upstream European O&G investment by 2022.
In 2015, Capex for offshore wind in Europe reached the $10 billion mark and has since hovered from $10 billion to $15 billion annually. It is expected that the annual capex levels will rise from around $11.1 billion in 2019 to around $13.8 billion in 2020, $18.2 billion in 2021 and more than $22 billion in 2022.
The abundant supply of oil and reduced demand have taken their toll on the oil price, and thus the annual capex toward upstream offshore oil and gas in Europe is expected to decline from over $25 billion in 2019 to less than $17 billion in 2022.
“Offshore wind development in Europe is expected to flourish in the coming years as countries strive to reach their ambitious 2030-targets – and large investments will be required. Commissioning activity is expected to increase towards 2025, and projects expected to be operational in 2023-2025 are already driving up capital expenditure in 2020. This trend will continue in the coming years.”Alexander Flotre, Rystad Energy’s project manager for offshore wind.
Europe has historically been the key market for offshore wind development, accounting for nearly 80 percent of global installed capacity by the end of 2019.
Although significant growth is expected in China, South East Asia and the US in the years to come, in terms of installed capacity, Europe is expected to retain its number one position through 2025.
European capacity is expected to increase to more than 53 GW by 2025, from an installed base of 21.9 GW in 2019, representing an annual growth rate of 16 percent. While Europe’s ambitious plans for 2030 will require new tender rounds in the coming years, it is expected that the bulk of commissioning activity towards 2025 will come from projects already approved.
In terms of offshore wind capacity, the UK is the largest country in Europe and is expected to drive a significant proportion of growth towards 2025, with mega-projects like Dogger Bank, Sofia and additional Hornsea phases currently on the cards, among others.
Other established countries, such as the Netherlands , Germany, Belgium and Denmark, are also expected to contribute to higher spending levels, while newcomers such as France and Poland are expected to add to growth in the period from 2023 through 2025.
“Many service companies have already transitioned towards concentrating increasingly on offshore wind activities, compared to their legacy oil and gas business. For these players, the growth in the offshore wind market provides a well-timed cushion that softens the blow of declining investments in the traditional oilfield services sector.”Alexander Flotre, Rystad Energy’s project manager for offshore wind.