April 24, 2019

Subsea can unite oil and renewables in 'blue economy'

Posted by Andrew Bradshaw
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The recent downturn in oil (which we appear to have moved away from, thankfully) and the rise in renewables have prompted may people over the past few years to consider the synergies between both industries. 

As the oil price plummeted to below US$30 per barrel in January 2016, leading to the loss of thousands of jobs in many locations around the world, it was argued that redundant oil workers could potentially find employment in the fledgling renewables sector. After all, many of the engineering and manufacturing skills were transferrable. 

The point at which the two industries come closest to convergence is in subsea – that vast area offshore between the waterline and the seabed. However, while Aberdeen has a wealth of subsea expertise, and is rightly recognised as the world’s subsea centre of excellence, the nascent offshore renewables industry really wasn’t able to make the most of this skillset until very recently with the emergence of a credible offshore wind sector.

Last year saw the installation of record-breaking levels of new UK offshore wind capacity, with more than 2 gigawatts now available – enough to power almost half the population of Scotland all year round. In Europe, offshore wind capacity increased by 18 percent in 2018 while in the U.S. momentum is certainly accelerating for this energy source.

Coinciding with an increasing focus on offshore wind has been a return to confidence in oil and gas, buoyed by greater market stability, a reinvigorated commercial focus and a workable commodity price around the US$60 mark. As a result, operators are once again looking to increase offshore and deepwater activity with a clear implication that subsea work will pick up in the year ahead.

The highly successful annual gathering of the world’s subsea industry – Subsea Expo – held in Aberdeen at the beginning of February, reflected that growing confidence within a sector that was arguably hardest hit by the recent downturn.

The event has traditionally been a focus for the subsea sector of the oil and gas industry, but this year there was a growing recognition that subsea applies to numerous sectors – wind, tidal, wave and oil and gas.

In the past, hydrocarbon and renewable energy sources have been portrayed as being at opposite ends of the energy spectrum, although there is widespread recognition nowadays that energy creation per se is transitioning to renewables, with gas as the enabler.

However, this year’s Subsea Expo made clear the technical challenges that bind these seemingly disparate disciplines together on the seabed provide greater commonality than the wider industry characteristics that may keep them apart.

While the oil industry has the technical expertise that offshore wind can draw on, oil, in turn, can learn much from the more customer-focused, flexible, often quicker to market and faster paced offshore wind sector.

There are several examples of subsea service companies that started in oil and gas and are expanding into offshore wind, thereby serving both markets. This is a trend that is likely to continue. It is the development of what could be described as a cross-sector ‘blue economy’. It is likely to excite more environmentally conscious new entrants who perceive oil and gas as a shorter-lived career option. It also opens up new business opportunities for companies still struggling to emerge from the oil downturn.

It’s not about where your office is located that counts, but what skills and expertise you can bring to the seabed to support the needs of the wider energy industry.

But for the oil side of subsea to maximise the opportunities that could exist in the dark watery depths will require a change in culture. Subsea Expo heard calls for greater collaboration, increased new technology adoption, less aversion to risk, support of the lower carbon economy and more mature relationships between operators and supply companies instead of the ‘master and servant’ model.

The oil and gas industry has often been accused of being inflexible, slow, archaic, secretive, risk averse and out of step with the rest of the global business community. But subsea arguably brings oil to its closest point with the working practices of the wider world. Subsea can be the portal through which oil transforms from a 20th century to a truly 21st century industry - alive and responsive to the challenges of current and future energy demands.

The downturn forced oil subsea service companies to explore new markets and business verticals in order to survive. The improving oil price represents a pivotal point for such businesses. The question they must ask themselves now is: will we retract back to our traditional markets exclusively, or will we continue our journey as part of the global energy transition?

Having dipped their toes into the blue economy, forward thinking will determine how much they are prepared to get their feet wet in future.

Interested in reading more from our Energy Insight series? See related articles here.

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