Transferring subsea skills to the offshore renewables sector could offer a new string to the bows of subsea players that have traditionally only worked in the oil and gas sector. The most obvious benefit is generating extra revenue streams in the tough times the petroleum industry is experiencing.

Diversification of subsea companies into offshore renewables, especially the growing wind sector, is not a new phenomena by any means but could be a more popular choice as oil and gas subsea engineering work has declined significantly in the recent downturn.

“The growth of the offshore renewables presents a range of opportunities for subsea engineering companies, something we’ve been working to highlight for a number of years,” Ian McDonald, foresighting senior executive for energy and low carbon technologies at Scottish Enterprise (SE), told SEN.

“Oil and gas supply chain companies can operate very successfully in the offshore wind market, regardless of the oil price environment, if they have a compelling proposition and are able to commit the necessary time, effort and resources into serving the sector.”

Room For New Entrants

“Subsea companies are already thriving in the offshore renewables, particularly the offshore wind sector, and there remains room for new market entrants. The rate at which new products and services come to the market is astounding at times, driven by the industry’s very strong drive to realize cost reductions,” McDonald said.

“The major offshore wind developers and their tier one suppliers are also very focused on improving U.K. local content levels in their U.K. projects, having agreed to a target to source at least 50% of their offshore wind farm contracts (in value terms) from U.K. companies back in 2012.

“Therefore, the industry is very open to U.K. companies offering products and services that do something better or cheaper.”

SE suggested nine key areas of opportunity for new market entrants: project management; array cables; substation structures; turbine foundations; secondary steelwork; cable installation; installation equipment; installation support services; and maintenance and inspection services.

Subsea Synergies

“There are strong synergies between oil and gas and offshore renewables—the fabrication of topsides and jackets serve as two really good examples of areas of crossover. The topsides of oil and gas rigs and offshore wind substations are superficially similar, and we’ve seen companies like Bladt in Denmark and Iemants in Belgium building both in recent years” McDonald said.

“Oil and gas jackets also bear a striking similarity to their offshore wind counterparts, and we’ve seen companies like BiFab alternate between building both here in the U.K. Other strong areas of synergy include site investigation, array cables, installation equipment and support services.”

The most obvious advantage for subsea companies entering the offshore renewables market is access to new revenue streams. However, there are a range of other benefits too, as exemplified by companies like FoundOcean, which entered the sector in 2003.

“While offshore wind work was relatively few and far between in the early 2000s, FoundOcean has experienced a steady growth in offshore wind grouting contracts since 2010, which now represent approximately half of the company’s revenues,” McDonald explained.

“This offshore wind driven growth also has had knock-on benefits for the oil and gas arm of the business, enabling the company to secure contracts and operate in markets they did not previously have the scale to do so.”

Disadvantages, Challenges

While there are clear synergies between oil and gas and the offshore renewables, McDonald said it was important to note the differences between the sectors in terms of business practices and contracting models.

“The fabrication of offshore wind jackets serves as a good example of these differences. While they may look superficially similar to oil and gas jackets, the sheer volume required for an offshore wind project—ScottishPower’s 714-MW East Anglia One project will use 102 turbine jackets—is very different to that of a typical oil or gas project,” he said.

“The high volume, low margin nature of some offshore wind contracts has proved too challenging for a number of tradition oil and gas supply chain firms, who entered the offshore wind market only to leave it again a few years later.

“Furthermore, the industry’s ubiquitous drive for cost reductions has put a downward pressure on margins across the highly competitive offshore wind supply chain, which operates at a European rather than a U.K. or local level.”

Wind Opportunities

Offshore wind is one of the biggest and most immediate opportunities for subsea oil and gas players. The main advantages of the offshore wind market are its sheer scale and the relatively certainty regarding the pipeline of projects being built into the 2020s.

“A recent study by BVG Associates for SE forecasts global offshore wind capacity to grow to 40 GW by 2020 and 60 GW by 2025, up from 12 GW today. Subsea companies already are securing major contracts with these projects, such as the £100 million [US$127.6 million] contract recently secured by BiFab to fabricate foundations for Beatrice offshore wind farm in Scotland,” McDonald said.

“There are also a number of smaller demonstration projects being built in the near future, particularly in Scotland, which may offer a route to market for companies with suitable capabilities but a limited track record in offshore wind.”

Dong’s Grimsby Investment

Denmark’s Dong Energy has recently unveiled plans to set up an offshore renewables hub in Grimsby, eastern England, to service the growing sector.

“Dong’s announcement follows a very welcome pattern of major investments in the U.K. offshore wind industry in recent years, which includes the Siemens’s investment in blade manufacturing and turbine assembly at Hull, the MHI-Vestas investment in blade manufacturing on the Isle of Wight, and the Bladt/EEW investment in monopile manufacturing at Teesside,” McDonald said.

“Earlier this year we also saw CS Wind take ownership of the Wind Towers Scotland facility in Machrihanish, and shortly afterward announce plans for a £27 million [US$34.5 million] upgrade in the facility to allow the fabrication of offshore wind towers.”

—Steve Hamlen

Offshore