United Kingdom

United Kingdom

Shell sends offshore pulses racing -- Oil company identifies wind as major new industry for involvement

Shell has identified wind energy as the major new offshore industry. Speaking at a renewable energy conference, the executive vice president of Shell Renewables said that Shell is determined to be an industry leader, just as it has been in oil and gas exploration and production. One industry analyst points out that European oil and gas reserves are depleting and capital expenditure is facing a long term decline. By contrast, investment in renewables is growing. Offshore wind investment as a whole is expected to increase dramatically over the next few years.

Wind energy is set to be the major new offshore industry, claims David Jones of Shell Renewables. And Shell is determined to be an industry leader, he adds, just as it has been in oil and gas exploration and production.

Speaking at a renewable energy conference, Jones, Executive Vice President of Shell Renewables' wind energy business, said that renewables could emulate the rise of oil which 100 years ago overtook coal and wood as the primary fuel source. Wind energy, the most competitive renewable resource, could be at the forefront of that development. Shell expects to become a "first tier player" over five years in the global wind energy sector.

Its initial focus will be greater Europe and North America. In the UK, Shell has applied for a first round offshore site licence from Crown Estates for a 60-90 MW wind plant project; in the Netherlands it has bid for a near shore project rated at 100 MW; it is negotiating to acquire a 50 MW wind farm in the USA and is pursuing over 100 MW of other wind energy projects, reported Jones.

The conference "Creating an All Energy Future" was held February 27-28 in Aberdeen -- the heart of the UK offshore oil and gas industry. The aim was to encourage companies to diversify into renewables alongside their oil and gas business.

John Westwood of industry analysts Douglas-Westwood pointed out that oil and gas reserves in the major European fields are depleting and capital expenditure is facing long term decline. By contrast, investment in renewables is growing. He estimated it would increase to an annual $23.7 billion. He pointed out that different forecasts predicting total investment over the period 2000 to 2010 range from $150 billion to $400 billion. His view was among the lowest -- $152 billion.

Offshore peaks in 2007

Turning to offshore wind investment, Westwood said there will be a huge increase in offshore wind installations in shallow waters, close to existing onshore electrical infrastructure. But he predicted that activity will peak around 2007 as prime locations are used up. Thereafter, it will drop to a more stable level of growth as developers turn to locations in deeper, more hostile waters which are economic only with larger and fewer turbines (up to 5 MW). Globally, he expected offshore wind to grow from the current installed capacity of 66 MW in 2001 to 1572 MW by 2010 -- a growth of nearly 2400%.

Nonetheless, while offshore wind may offer diversification opportunities for some companies, he stressed that the size of the sector cannot compare to oil and gas. Around $1.6 billion of capital investment is expected in European offshore wind over the next ten years. By contrast capital expenditure in just the UK offshore oil and gas sector is expected to be $40 billion.

The bigger game plan is to transfer to offshore wind some of the $70 billion investment expected in onshore wind, said Westwood. "If we can move 10% of the onshore market offshore, we are going to increase the offshore market by 300%," he said. "But it depends very much on political will."

The conference organisers were delighted with the response from firms -- mainly small and medium size enterprises -- curious to find out what opportunities the offshore renewables industry can offer. Over 225 delegates and around 47 exhibitors attended the two day event at Aberdeen's conference and exhibition centre. Alongside established players such as Vestas in the spacious exhibition hall were many who were looking at renewable energy for the first time. Some of the companies exhibiting their wares and services had done their homework by researching the offshore renewables market. Others were dipping an experimental toe in the water.

For those who came to learn, the messages were upbeat and encouraging, underlined by the apparent commitment to offshore wind of a heavyweight like Shell. "The UK offshore industry based here at Aberdeen is uniquely positioned to assume a world leading role in [offshore wind's] implementation," said Jones. But time and again speakers pointed out that the future of offshore wind in the UK depends on the will of politicians in Westminster.

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