Energy giant BP is moving into offshore wind for the first time with a strategic partnership with Equinor
The company’s first deal in the offshore wind market will be to develop major assets in the US and jointly pursue further offshore wind opportunities in the country.
The move comes a month after BP announced a new strategy, which includes an aim to increase annual low carbon investment 10-fold to around US$5Bn a year by 2030 and grow developed renewable generating capacity from 2.5 GW in 2019 to around 50 GW by 2030.
BP executive vice president for gas and low carbon Dev Sanyal said the potential in the offshore wind market is “huge.”
Estimates suggest the offshore wind sector is forecast to grow from around 30 GW today to approximately 190 GW by 2030, the fastest growth rate of all renewable energy sectors.
BP chief executive office Bernard Looney said, “This is an important early step in the delivery of our new strategy and pivot to truly becoming an integrated energy company.
“Offshore wind is growing at around 20% a year globally and is recognised as being a core part of the world’s need to limit emissions.
“Equinor is a recognised sector leader and this partnership builds on a long history between our two companies. It will play a vital role in allowing us to deliver our aim of rapidly scaling up our renewable energy capacity, and in doing so help deliver the energy the world wants and needs.”
The strategic partnership includes the development of existing offshore wind licence interests on the US east coast and plans to jointly pursue further opportunities for offshore wind in the US.
Mr Sanyal said, “This partnership provides an extraordinary opportunity for our two companies to work together in pursuit of our shared ambitions.
“It will leverage BP’s trading expertise and onshore wind experience with Equinor’s sector-leading track record in offshore wind to deliver value for our shareholders. We look forward to exploring further opportunities in the fast-growing US wind markets.”
BP will acquire a 50% interest in Equinor’s Empire Wind and Beacon Wind assets, with Equinor remaining as the operator. BP has agreed to pay US$1.1Bn.
Empire Wind is located offshore New York City, with a total area of 80,000 acres and is expected to have an installed capacity of 2 GW.
Beacon Wind is located offshore Massachusetts state with a total area of 128,000 acres and is expected to have an installed capacity of 2.4 GW.
Currently Equinor holds a 100% interest in the Empire Wind and the Beacon Wind leases. The transaction is in line with Equinor’s renewable strategy to access attractive acreage early and at scale, mature projects, and capture value by derisking high equity ownership positions.
Equinor will remain the operator of the projects in the leases through the development, construction and operations phases and it is anticipated that the windfarms will be equally staffed after a period of time.
Equinor chief executive officer Eldar Sætre said, “We look forward to working with BP who share our strong ambition to grow in renewable energy.
“Our partnership underlines both companies’ strong commitment to accelerate the energy transition and combining our strengths will enable us to grow a profitable offshore wind business together in the US.”
Equinor executive vice president for new energy Pål Eitrheim said, “This transaction with BP demonstrates Equinor’s ability to create value from developing offshore wind projects. Over the past decade Equinor has built world-class technical expertise in offshore wind.
“This has enabled us to access high-grade wind acreage, resulting in a material, high-quality project pipeline. Optimising equity and bringing in new partners allow us to realise value, increasing our financial flexibility to fund further growth.”
Equinor said that, together with BP, it would consider future joint opportunities in the US for both bottom-fixed and floating offshore wind and will leverage relevant expertise to jointly grow scale.
Equinor has already set ambitions to grow its renewables capacity to 4 to 6 GW by 2026 and 12 to 16 GW by 2035 and has recently announced its expectation to accelerate these ambitions. It is working to build scale in core areas – the North Sea, the US and the Baltic Sea, while securing growth options in other selected markets for both bottom-fixed and floating offshore wind.
Subject to customary regulatory and other approvals, the deal is expected to close in early-2021.