Capex on offshore wind to surpass upstream spending in Europe in 2022

By Trend

Capex on offshore wind will surpass upstream spending in Europe in 2022, Trend reports citing Rystad Energy.

The oil market collapse caused by the Covid-19 pandemic is set to delay several oil and gas developments in Western Europe, putting capital expenditure in the offshore sector on a continued downwards trajectory through 2022, according to the company.

“In light of the postponement of multiple final investment decisions (FIDs) on projects and lower investments in offshore oil and gas, coupled with increasing activity in the offshore wind sector, Rystad Energy expects that the two markets will reach parity as soon as next year. We anticipate that capital expenditure (capex) on offshore wind will surpass upstream O&G spending in Europe in 2022,” Rystad Energy said in its report.

Capex towards offshore wind in Europe surpassed the $10 billion mark in 2015 and has since hovered in the range of $10 billion to $15 billion per year, according to the company’s estimates.

“Annual capex levels are expected to 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 oil supply and reduced demand have taken their toll on the oil price, and consequently annual capex towards upstream offshore oil and gas in Europe is expected to decline from more than $25 billion in 2019 to less than $17 billion in 2022,” reads the report.

“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,” says Alexander Flotre, Rystad Energy’s project manager for offshore wind.

“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,” Flotre adds.

“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,“Flotre concludes.