To remain relevant, OSV owners must consider how they can secure their role in the emerging offshore wind market in Southeast Asia, writes GAC Group’s Lailah Soon
Increasing support for energy transformation in Southeast Asia could see the region emerge as the next global hotspot for offshore wind in the decades ahead. While still in its relative infancy, the region’s wind market is growing and should be firmly established within 20 years as investment increases.
One of the largest potential regional offshore wind markets in Southeast Asia is Vietnam, where the potential offshore wind energy capacity is estimated at 475 GW, according to the World Bank. Based on locations within 200 km of its coast, Vietnam has the potential for 261 GW of fixed and 214 GW of floating offshore wind.
In 2019, FID was taken on Vietnam’s first large offshore wind project. UK-based Enterprize Energy received approval in June to begin development of a 3.4 GW offshore wind project located off the coast of Vietnam’s Binh Thuan and Ba Ria-Vung Tau provinces. Plans call for the project to be developed in multiple phases, with the initial commissioning of 600 MW by 2022. Some 64 wind turbines will be installed in 25 to 45 m of water in the initial phase.
Between US$6Bn and US$8.3Bn of investment capital is expected to go to contractors in Vietnam engaged in the process of surveying, designing, processing and manufacturing. The estimated generating annual revenue is about US$600M for Vietnamese contractors during the operation and maintenance period, according to Enterprize Energy.
A second offshore wind project being developed for the Soc Trang Province by a joint venture of Mainstream and Phu Cuong will have a capacity of 800 MW. These offshore wind projects are critical to Vietnam’s future energy needs.
Energy policy reform
But Southeast Asia’s potential can only be fulfilled if a concerted effort is made to introduce energy policy reforms to create a pathway to decarbonisation. What’s more, a switch to a cleaner energy mix in Vietnam could pave the way for similar transformations in other Southeast Asian countries, such as Cambodia.
Momentum is being supported by newly established initiatives from international trade associations, such as the Global Wind Energy Council’s (GWEC) Southeast Asia Task Force, established in 2019 and already active in Vietnam, Thailand, Philippines, and Indonesia. While the task list is varied and complex, key priorities include mobilising public sector support, engagement with the renewables sector, and overcoming unreliable energy distribution networks.
The will to expand the region’s renewables industry apace is there. That eagerness is leading energy industry players and their supply chains to examine what changes they must take to remain profitable and relevant in a market where a decarbonised energy mix will play an ever-increasing role. The offshore oil and gas industry and the OSVs that serve it are among those that must consider such questions.
Battered market must broaden its scope
OSV owners and operators have become accustomed to sluggish day rates, increased competition and project delays and cancellations in the tighter market conditions of recent years. Managing the potentially significant impact of such issues is part of their daily routine. And, with market sentiment unlikely to change significantly in the immediate future, many recognise that now is the time to shift their vessels’ work scopes, with support for windfarm projects viewed as a key source of potential growth.
Many of the tasks OSVs perform to support offshore oil and gas operations are similar to those needed for offshore windfarms. These include seismic surveys, transporting crew, providing offshore living quarters and acting as a supply house for equipment and tools. What’s more, with the offshore wind industry craving cost savings and expertise like oil and gas before it, those with offshore expertise, experience and assets are well placed to meet demand from the burgeoning renewables sector.
Lessons learned from Europe
If energy policy in Southeast Asia lends itself to the acceleration of offshore wind, it can take some lessons from Europe, where expertise from the oil and gas sector is already serving renewables with notable success.
The UK, for example, is a growth market for renewables, and home to the largest windfarms in the world developed over the past decade. This has translated directly into opportunities for incumbent oil and gas industry contractors. The GAC Group is actively involved in roughly 75% of offshore windfarms in the UK, a trend which correlates directly to oil and gas contractors moving into the wind market.
As a shipping, logistics and marine services company, the Dubai-based GAC Group has gained valuable experience in the UK that can be effectively transferred to Southeast Asia. The region is in a similar position today as the UK was five years ago. Crucially, Southeast Asia must seek out and leverage the experience of experts based there, especially in specialist fields such as seismic surveys.
The region’s offshore wind industry will need to rely on organisations that have a strong local presence in the region to fulfil tasks such as identifying local ports to use as marshalling points for jacket foundations and other heavy components that need to be installed on offshore wind projects.
Taking an optimistic view, the evolution of the offshore wind market in Europe demonstrates that oil and gas contractors in Southeast Asia can reasonably look forward to opportunities beyond the construction of offshore windfarms. Indeed, operations and maintenance projects will continue to provide regular work for OSV owners and their teams.
Global energy demand – a Japan-sized addition
Energy demand in Southeast Asia is forecast to grow at twice the global average in the next 20 years, adding the equivalent of Japan’s entire energy system to global demand. This rapid growth underscores the need for the world’s most experienced energy executives to help the region prepare to take increasingly complex energy policy decisions against a backdrop of strong economic and population growth.
Such is the challenge and the opportunity ahead, that the International Energy Agency (IEA) recently described the region as a key driver of world energy trends in the next 20 years. For the incumbent oil and gas industry and its supply chain, the coming years present a unique opportunity to shape the future energy mix. This opportunity lies not only in driving their established industries, but also in supporting the offshore wind industry that will likely follow them. With the support of OSV owners, that focus on time-critical and cost-dependent project delivery, they can continue to remain relevant in a changing industry increasingly defined by decarbonised energy.
Lailah Soon is regional business development manager – energy (API Region) at GAC Group