Equinor’s big bet on wind will rival major oil projects

Equinor and its partner SSE have been awarded contracts to develop three large-scale offshore wind projects in the Dogger Bank region of the North Sea. This will be the world’s biggest offshore wind farm development, with a total installed capacity of 3.6 GW. The projects are expected to produce enough energy to power the equivalent of 4.5mn UK homes.

The Dogger Bank wind farm, located more than 130 km east of the Yorkshire coast in water depth ranges from 2­0–35 metres, will consist of three projects – Creyke Beck A, Creyke Beck B and Teesside A.

‘The successful bids for the world’s largest offshore wind development represent a game-changer for our offshore wind business and support the development of Equinor as a broad energy company,’ says Eldar Sætre, CEO of Equinor. ‘A full-scale development of Dogger Bank will constitute an industrial wind hub in the heart of the North Sea, playing a major role in the UK’s ambitions for offshore wind and supporting the net zero ambition. Excellent wind speeds, shallow waters and scale make Dogger Bank well positioned to deliver low cost renewable electricity to UK homes and businesses.’

He continues: ‘Dogger Bank, together with the recent award for Empire Wind in the US, positions Equinor as an offshore wind major.’

The partners are planning for final investment decision (FID) for the first project during 2020 and first power generation is planned for 2023. Further phases of the Dogger Bank project will be developed thereafter.

The offshore wind project at Dogger Bank will not only be Equinor’s largest project through 2026, it will also rank as the sixth largest offshore development project in the world during this period, according to market analyst Rystad Energy, with an expected $11bn in capital investments from 2020–2026.

‘Equinor’s mega offshore wind investment promises hope for a deflated service industry. An eleven-digit investment programme – a rare occurrence within the offshore oil and gas industry – is entirely unprecedented in the offshore wind space,’ says Audun Martinsen, Head of Oilfield Services Research at Rystad Energy.

To put the investment into context, Rystad Energy ranked all offshore development projects globally by total investment (see Figure 1). Looking at Equinor’s current portfolio, Dogger Bank will rank as number one for the period from 2000 to 2026, above the yet-to-be-sanctioned oil projects Carcara in Brazil and Rosebank in the UK. In the global world of offshore, the Dogger Bank investments will rival key Brazilian deepwater oil projects such as Mero and Lula.

The total value of awarded offshore greenfield oil and gas contracts to EPCI (engineering, procurement, construction, and installation) and subsea providers in 2019 is expected to be around $60bn, a number Rystad anticipates could fall to $43bn in 2022.

‘The influx of offshore wind contracts worth billions of dollars will be welcomed with open arms by marine contractors. Many anticipate challenging times ahead given the uncertain outlook for offshore oil and gas developments. Order intake is expected to struggle in the early 2020s due to the increasing market share of shale and OPEC oil, and the consequentially reduced oil prices,’ Martinsen remarks.

Equinor hopes to become the world’s largest offshore wind operator. In July, it won a major project off the coast of New York which represents another $3bn of potential investments. An additional four projects, totaling around 7.4 GW in capacity, are also up for sanctioning in the 2020s.

‘Equinor’s offshore wind master plan could hold the key to reversing this trend, as other operators rally behind the standard-bearer to put wind in the sails of the offshore industry,’ Martinsen adds.

Chinese ambitions
Equinor has also signed a memorandum of understanding (MoU) with CPIH (China Power International Holding) to cooperate on offshore wind in China and Europe.

China is rapidly increasing its use of renewables and natural gas, and is set to become the world’s biggest offshore wind market by 2030, according to the venture.

Commenting on the news, Soeren Lassen, Wood Mackenzie Senior Research Analyst, says: ‘2019 is shaping up to be the strongest year for Equinor when it comes to offshore wind. The MoU between CPIH and Equinor comes in the wake of two major tender victories in the US (816 MW) and UK (1,800 MW). Equinor also secured subsidies for its 88 MW Hywind Tampen project located in Norway this year, which will be the largest floating offshore wind project in the world once it is grid-connected in 2022.’

‘Equinor has, in 2019, cemented its strong position in offshore wind – not only through its tender victories but also though its ability to position itself in fledgling offshore wind markets, eg in Poland, South Korea, the Canary Islands and now China.’

Lassen continues: ‘Equinor is only the second European developer to break into the Chinese offshore wind market. The other European developer, EDF, only managed to do so earlier this year. Both players have leveraged existing relationships with state-owned Chinese companies to enter the market, proving that relationships are key to enter the Chinese market.’

Figure 1: Total investments for Equinor-operated projects, 2020 to 2026, in $mn
Source: Rystad Energy