375
1 INTRODUCTION
Since the last milestone, when oil becomes a global
key component and the industry strengthened, the
search for oil and gas (O&G) has been focused on the
seas. This is how an offshore sector was created, and
become a valuable member of the drilling field. The
energy demand is constantly increasing due to the
rising global population and power consumption. The
rapid urbanization of developing countries also
increases the need for energy, such as liquid fuels and
natural gas. As offshore O&G wells have a longer
production period than onshore, and due to improves
the efficiency of drilling automation, the drilling
activities at sea have significantly increased.
As manufacturers are constantly improving the
innovative technologies, offshore exploration and
production (E&P) operations moving into further
remote locations and deeper waters. Improvements in
equipment could not only boost oilfield production
but also increase the new technology adoption of
offshore drilling [1]. This should lead to the expansion
of the global mobile offshore drilling unit (MODU)
market.
Offshore energy production is very important in
the global energy structure as more than a quarter of
The Analysis of Offshore Industry Transition -
A
cceleration from Oil & Gas to Wind
P. Ko
łakowski & G. Rutkowski
Gdyn
ia Maritime University, Gdynia, Poland
ABSTRACT: The present paper provides an overview of the current state and future trends of the offshore
sector worldwide, as well as the relationship between the oil and gas (O&G) and the wind power industry
offshore. Study on the offshore energy transition basis on review of literature, reports, and outlooks of main
energy agencies, classification societies, and main offshore companies - their pathways and ambitions. A
comparative analysis of the oil prices to their e
xtraction at sea. Analysis of new build and scrapped drilling
units, and their utilization. This is followed by correlation analysis between the emergence of new projects in
O&G and wind farms offshore. The new and cheaper technology, and ambitions to reduce greenhouse (GHG)
emission to zero levels, favor renewable. The results disclose that the main O&G companies start investing in
renewable technologies. The offshore energy transition has already begun and accelerating. Nevertheless, full
transition will take a while, as the global power demand is still too high to be covered only by a renewable
source of energy. The number of annual O&G assets decommissioning is double in size compared to the new
projects, and Mobile Offshore Drilling Unit (MODU) utilization average of 60%. Offshore wind develops
dynamically, and the forecasts show that this trend stands at the same high level to cross a number 100 GW
produced from offshore wind globally in 2025, but there is a visible lack of Mobile Offshore Wind Power
Service Operations Units (MOWU). If well planned there is room for mutual benefits between O&G and wind
within the offshore sector due to re-orientation measures.
http://www.transnav.eu
the
International Journal
on Marine Navigation
and Safety of Sea Tra
nsportation
Volume 16
Number 2
June 2022
DOI: 10.12716/1001.16.02.20
376
the world’s oil and natural gas is produced at sea [2].
It would seem, that due to continuous demand for
energy worldwide, the O&G offshore should continue
to develop. The question arises, due to the latest
downturns, geopolitical frictions, and green
worldwide economy with significant limits in GHG
emissions. Is the oil extraction offshore still profitable?
On the other side, the waters around many
countries are seen as a major potential source of
electricity supply from offshore wind power. Offshore
wind is becoming competitive with other renewable
energy as technology is improving, with larger
turbines and higher turbine ratings [3]. The first
projects using floating wind turbines and solar power
plants are presently entering into operation, based on
concepts widely deployed in the offshore O&G sector.
Cost-competitive floating technologies would expand
the economic resource base for offshore electricity
generation significantly [4].
While the Paris Agreement has been defined with
their ambitions [5], the international organizations,
the world's largest classification societies as well as
major O&G companies start presenting their
pathways. The main goal of all strategies is the fight
against climate change by reducing GHG emissions
up to 2050 or even eliminating it up to the end of the
century. To reach this goal, all parties have to reduce
fossil fuels and change the power generation system
to renewable technologies and alternative fuels. That
would have a huge impact on the offshore sector. But,
is it possible with present demand?
The present study provides an overview of the
current state and future trends of the offshore sector
worldwide, as well as the relationship between the
O&G and wind power at sea. Study on the offshore
energy transition basis on review of literature, reports,
and outlooks of main energy agencies, classification
societies, and main O&G companies - their pathways
and ambitions is presented in section 1. Materials and
data used in the herein study in section 2. The results
in section 3, provide key findings to this research
field’s patterns. A comparative analysis of the oil
prices to their extraction at sea points where is the
profitability limit of the oil production. The analysis
of new build, scrapped, and lay up drilling units, to
their utilization, and correlation analysis between the
emergence of new projects in O&G and wind farms
offshore shows the real trends in which direction the
sector is going. The discussion and conclusion of the
study are presented in section 4.
2 LITERATURE REVIEW
To answer the question of where we are, in the global
energy transition and how big an impact that will take
on the offshore sector, a full objective picture from all
sides is needed. As a part of this study, we have
reviewed the reports and energy outlooks of main
energy agencies and organizations, the world's largest
calcification society, and major O&G and wind
offshore companies.
The recent outlooks and reports of the below-
mentioned institutions and companies have been
reviewed and compared to have an overview of the
latest trends in the offshore energy transition:
− The International Energy Agency (IEA)
coordinates a collective response to major
disruptions in the supply of oil. The agency
provides data, analysis, and solutions on all fuels
and technologies.
− Organization of the Petroleum Exporting
Countries (OPEC) is an inter-governmental
organization of 13 nations with the biggest O&G
reserves. The mission of the organization is to
coordinate and unify the petroleum policies of its
member countries and ensure the stabilization of
oil markets to secure an efficient, economic, and
regular supply of petroleum to consumers.
− International Renewable Energy Agency (IRENA)
is an inter-governmental organization supporting
countries in their transition to a sustainable energy
future. The agency facilitates access to all relevant
information including reliable data on the
potential of renewable energy, best practices,
effective financial mechanisms, and state-of-the-art
technological expertise.
− DNV is the world's largest international accredited
registrar and classification society. Provides
services for several industries including maritime,
renewable energy, O&G, electrification. It is also
the largest technical consultancy and supervisory
to global renewable energy.
− The main O&G companies: BP, Shell, CNPC,
Exxon Mobile, Total, Chevron, ARAMCO,
SINOPEC, CNOOC, Equinor.
The mentioned reports have been reviewed mainly
in terms of strategies taken or planned to take in the
offshore sector.
2.1 Main agencies and organizations' energy transition
outlooks
Following the latest update from the International
Institute for Applied System Analysis (IIASA), we
will arrive at a global population estimate of 9.4
billion by 2050 [6]. The global economy in 2040 is
expected to be double the size it was in 2018. We also
need to keep in mind that almost one billion people
still lack access to electricity and three billion with no
access to clean fuels for cooking [7]. The fact is, that
very soon, the world will need much more energy to
meet the demand.
As per OPEC forecasts, the global energy demand
is to increase to more than 357 million barrels of oil
equivalent a day (mboe/d) in 2040, with an average
growth of about 1% per year. The long-term global oil
demand is expected to increase by about 12 million
barrels a day mb/d. From the other side the global
level, growth is forecast to slow from a level of 1.4
mb/d in 2018 to around 0.5 mb/d towards the end of
the next decade [7]. The world will need more energy
neither conventional nor renewable, but shifting away
from fossil fuel use to renewable sources not only
reduce carbon emissions, but it would also reduce the
impacts of climate change and improve conditions for
society and business.
Offshore energy resources are huge, and many of
the technologies to produce them are well placed to
deliver competitive products [2]. Nevertheless,
377
questions remain as to how offshore energy
production will fare in the period to 2040. OPEC
states that offshore crude oil production in the
medium-term should be back on the growing track
because the production is growing again in the main
production areas. Besides, to strong development in
new areas including Brazil and West Africa. They
predict that up to 2024, crude production in these
areas is expected to contribute nearly 25% of non-
OPEC liquids supply growth [7]. On the other side,
the IEA points out that due to the world’s main
offshore O&G fields being fully developed, the next
wave of offshore resources are generally in deeper
water and much further from shore. Conduct new
technological, logistical, and cost challenges [2].
As costs continue to fall for solar and wind
technologies renewable has become the lowest-cost
source of new power generation. Wind farms are now
the cheapest renewable energy source with a leveled
cost of electricity (LCOE) between 60-110 USD/MWh.
Nevertheless, offshore wind farms are still one of the
most expensive renewable energy production
methods, with an LCOE of between 120-135
USD/MWh [7]. All agencies expect that by 2030,
offshore wind power costs will approach those of
onshore wind power and conventional power
production ([7],[8]). IRENA expects that costs will
continue to decline up to 2030 for offshore wind
power technologies for another 55% [9]. This has
become competitive with conventional sources.
Significant advances in technology can surely only
increase and improve their capacity factor.
Agencies put strong attention that the location of
wind power plants needs to be carefully chosen, as
evidenced by the often low capacity factor of existing
wind power plants [9]. An important aspect to bear in
mind with renewable energy, especially in
conjunction with wind power is the fact, that the
natural conditions have a key impact on energy
production. In the case of wind, this concerns whether
and how strong the wind blows. A high capacity
factor can only be obtained where the wind blows
constant and forcefully from more or less the same
direction [10]. This is a characteristically offshore case.
Consequently, there are significant constant
improvements, mainly related to scaling up existing
technology and expanding on the experience gained
in the deployment of offshore wind turbines [11].
Very important for offshore wind power generation,
is it no longer needs to be limited to shallow shelf
regions [12]. The fixed platforms used to hold the
wind turbines, limit the regions where such offshore
wind farms can be built, but the invention of floating
wind turbines can extend the range of potential
offshore wind farms all around the world [13].
Presently, the wind is the second most important
renewable power source, behind hydropower, both
given generated power and installed capacity. It
accounts for 18% and 24%, respectively, in renewable
energy [7]. DNV Energy Transition Outlook forecasts
that 30% of all global electricity production will come
from wind energy by 2050, with 12% from offshore
wind and 18% from onshore wind [14]. IRENA
provides information that offshore wind projects in
Europe are now more and more competitive with
fossil fuels [9].
However, OPEC cools down the IRENA
enthusiasm and puts on attention that we need to be
careful with interpretation when comparing these
numbers to conventional power plant capacity:
“Detailed numbers from the IRENA for both
renewable capacity and generated renewable power in
2017 reveal an average capacity factor for the whole
renewable power sector of only around 32%. The
capacity factor is very important in judging the actual
contribution of additional power capacity. For
example, 1 MW of PV solar capacity delivers only
around 1,100 MWh in a year, 1 MW of onshore wind
capacity already delivers approximately twice as
much (2,170 MWh) and 1 MW of offshore wind
capacity delivers again substantially more at around
3,030 MWh. However, modern coal-fired power
plants used for base-load generation have a capacity
factor of 80%, and nuclear power plants are typically
intended to deliver a capacity factor of 90%. In these
cases, significantly more electricity is generated
throughout the year, namely 7,000 MWh and 7,900
MWh, respectively. To catch up with a typical coal-
fired power plant generating 600 MW of electricity,
3,800 MW of PV power or 1,940 MW of onshore wind
would need to be installed. Replacing a large1,300
MW nuclear power plant would require 8,200 MW of
PV, 4,200 MW of onshore or 3,000 MW of offshore
wind” [7].
Offshore wind is becoming competitive with other
renewable energy as technology is improving, with
larger turbines and higher turbine ratings (with up to
20 MW turbines expected to be used for projects in
2030) [11]. As a result, capacity factors are increasing,
boosting energy yields and reducing total installed
turbines and other costs [14]. Furthermore,
competitiveness and LCOE reductions have been
driven by recent projects. The increased deployments
and growing maturity of offshore wind markets in
Europe and China between 2010 and 2020 have also
reduced risks and uncertainty for investors [9].
As per IEA, the transformation of the energy sector
can happen without the O&G industry, but it would
be more difficult and more expensive [8]. A main and
very important aspect of the world's energy transition
is a fight against climate change to eliminate GHG
emissions. Due to a couple of new structure
regulations, like the Paris agreement regarding
climate change [5], a European Green Deal [15], or
IMO's new global sculpture limit of 0.5% for ships
fuel oil [16], the decarbonization process has begun.
The company's commitments to reduce emissions
intensities are becoming more common. The impacts
of the climate will become more visible and acute in
the coming years, increasing the pressure on all parts
of society to find solutions [8].
Agencies, institutions, research & intelligence
companies, and main O&G companies are trying to
aim the goals and introduce their pathways to find the
best solution. The IRENA’s Transforming Energy
Scenario together with several other scenarios have
recently been published to explore transition
pathways for the energy system in the coming
decades. Climate change or discussion about
decarbonization and its pathways is not a subject of
this study. However, is noticeable that the role of
renewable share is coming to increase in a significant
378
way. IEA, as well as OPEC, have a common view on
the pathways towards an energy transition. It is
supposed to be different to each country, that further
shifts in the power generation will depend on
country-level policies and investments due to the
varying conditions for renewable energy sources, as
well as the specific nature of renewable ([2],[7]).
Governments' policies will play a key role in the
amount of electricity generated from renewable
sources and in limiting the burning of fossil fuels to
produce power [7]. The focus on climate change will
also play an important role in technological research
and development like new generation marine
propulsion systems ([17],[18]). The European Green
Deal Investment Plan presented by European
Commission in December 2019 predicts spending at
least 1 trillion euro over a decade to reach the goals.
That is a strong signal where the cash flow will be
directed to [9]. The OPEC suggests that for the time
being during the transition period it is not about
choosing one energy source over another. There is a
need to look to evolve, develop and adopt cleaner
energy technologies that make it possible to meet
expected future energy demand sustainably and more
efficiently [7]. The IEA, aware that, in the absence of
more concerted policy action, demand for oil and
(especially) gas would continue to grow to 2040, while
coal demand would remain where it is today [2].
2.2 Main O&G companies' energy transition outlooks
and their strategies
The IEA classifies O&G companies into four main
groups: two of these categories cover companies that
are fully or majority-owned by national governments
and the other two relate to privately-owned
companies. In the first group are National Oil
Companies (NOCs) that concentrate on domestic
production. The second group of International NOCs
(INOCs) has both, domestic and significant
international operations.
Into the third group belongs the “Majors” the
integrated companies listed on US and European
stock markets include seven companies: BP, Chevron,
ExxonMobil, Shell, Total, ConocoPhillips, and Eni.
The last fourth group is “Independents” - either fully
integrated companies, similar to the Majors but
smaller in size, or independent upstream operators[8].
Along with the pace of energy transformation,
several O&G companies have begun to adjust their
business models. Both to reduce emissions and to
mitigate climate-related business risks. Every part of
the industry needs to consider how to respond
therefore no single O&G company will be unaffected
by clean energy transitions. The industry landscape is
varied and there is no single strategic response that
would be having an important effect on all. The O&G
industry used to put strong attention on the Majors, as
the companies have a strong influence on the industry
direction [8].
Table 1. Future emission ambitions of Major O&G
company’s SOURCE: basis on major company’s reports
([19],[20],[24],[25],[26],[27],[28])
_______________________________________________
Majors Targets
_______________________________________________
BP Net-zero by 2050
Shell Net-zero by 2050
Total Net-zero by 2050
Chevron 2-5% net reduction for gas by 2023
5-10% net reduction for oil by 2023
ExxonMobil 10% net reduction for oil sand by 2023
Several visible targets.
ConocoPhillips Net-zero by 2045-2055
Eni Net-zero by 2030 (upstream)
Net-zero by 2040 (group)
_______________________________________________
As per Tab1. created based on Major company’s
outlooks and energy reports, we can observe that
most of the Majors have a similar target – a net-zero
greenhouse gas emissions by 2050 or sooner. To
achieve that goal, the companies need to implement
and accelerate the transition as soon as possible. Most
of the O&G companies like Shell or BP have been
changed their portfolios from petroleum companies to
energy companies, to show, that they are active
players in the transformation of the energy system
([19],[20]). So far, main O&G companies spending
around 5% on average on projects outside the core
business, with the largest outlays in solar PV and
wind [2]. The investments and strategic responses to
energy transition by selected companies are illustrated
in Tab. 2.
Nowadays, for those companies which are
planning to diversify their operations, diverting
capital towards renewable businesses requires an
attractive investment opportunity. Some O&G
companies have also moved into new areas, for
example in renewable power while stepping up
research and development activity. It is noticeable that
all main O&G companies worldwide have already
started energy transitions (Tab. 2).
The INOC and NCO’s companies like Sinopec,
Petro-China, and CNOOC also want to spend billions
on renewable energy assets to stay relevant in a low-
carbon future. The world’s largest oil refiner, Sinopec
wants to lead China’s hydrogen push, with plans for
hydrogen refueling stations alongside its petrol
stations [21]. Sinopec in their annual report states that
under unstable oil price circumstances they will
optimize project implementation, plans to keep a
stable production of crude oil, and realize growth for
natural gas. In natural gas development, the company
will accelerate the capacity construction of key
projects [22]. Petro-China became the first Asian state-
owned company to set a target for near-zero
emissions by 2050 [21], while offshore oil explorer
CNOOC Limited in September 2020 announces the
first offshore wind power project connected to the
grid with 67 wind turbines and 300MW capacity [23].
On the other side, Saudi Aramco has another
target. The company program is to diversify its energy
away from crude oil and liquids for power generation,
plans to be among the world’s top three natural gas
producers. To meet future global and domestic energy
demand. The company’s gas production is expected to
double in the coming decade [29]. Aramco in their
reports states that with the global population forecast
to constant increase, even more energy will be
379
required to meet rising demand. Aramco predicts that
it will take not only fossil fuels or only renewable, but
all available sources of energy to cover all demand.
While alternative energy sources are steadily making
advances, they will not be capable of meeting future
demand alone [30].
3 MATERIALS
Section 3.1. of this article includes a comparative
correlation between crude oil prices to their extraction
at sea (Fig. 1) and offshore production opex for oil
fields in the main offshore regions (Fig. 2). To the
analysis was taken the Brent Crude as the leading
global price benchmark for Atlantic basin crude oils.
The average cash cost to produce a barrel of oil was
compiled using data from more than 15,000 oil fields
across 20 nations. The production costs were
calculated by including a mix of capital expenditures
and operational expenditures. Capital expenditures
included the costs involved with building oil facilities,
pipelines, and new wells. Operational expenditures
included the costs of lifting oil out of the ground,
paying employee salaries, and general administrative
duties. As a source, we have used UCube by Rystad
Energy, an interactive published with open access
[31].
Data used in the analysis in section 3.2. and 3.3
respectively has been acquired from Riglogix -
Westwood’s flagship product [32], Rystad Energy
[31], HIS Markit [33], and Drilling Contractor
Magazine [34]. The intelligence and research
companies offer tools, consultancy services, and
analytics data to the energy industry.
4 ANALYSIS AND RESULTS
In this section, we have determined the profitability
limits and breakeven price for offshore O&G
production by the comparative analysis of oil prices to
their extraction at sea – section 3.1. The analysis of
new-build scrapped and lay-up drilling units, and
their yearly utilization presented in section 3.2,
provides information about the trends of MODU
owners in the O&G offshore market. Section 3.3.
provides analysis between the emergence of new
projects and decommission, both in O&G and wind
offshore. That analysis aims to point out the trends in
offshore transformation.
4.1 Comparative analysis of oil prices to their extraction
at sea
The oil price, in general, refers to the spot price of a
barrel on benchmark crude oil. There is a differential
in the price of a barrel of oil, based on its element
factors such as specific gravity or API gravity, sulfur
content, and location. The leading global price
benchmark for Atlantic basin crude oils is the Brent
Crude. Brent is used to set the price of two-thirds of
the world's internationally traded crude oil supplies.
It is one of the two main benchmark prices for
purchases of oil worldwide, the other one is West
Texas Intermediate (WTI) [38].
Table 2. Investment and strategic responses to energy transitions by selected companies - illustrative, based on 2015-19
activity SOURCE: IEA and major company’s reports ([8],[19],[20],[24],[25],[26],[27],[28])
__________________________________________________________________________________________________
Company Enhancing traditional Deploying CCUS (for Supplying liquids The transition Overview
O&G Operations Enhanced Oil Recovery and gases for the from fuel to grade
(reducing methane (EOR) and centralized energy transition “energy companies”
& CO2 emission and emissions) (low carbon gases (solar PV, wind and
sourcing of renewable Bio-fuels) other power generation;
power) and advanced electricity distribution
and electrified services)
__________________________________________________________________________________________________
3 categories 2 categories 2 categories 4 categories All categories
max grade: 3 max grade: 2 max grade: 2 max grade: 4 max grade: 11
__________________________________________________________________________________________________
_
BP 2,5 1 1,5 3 8
Chevron 2,5 1,5 1 1 6
Eni 2,5 1 1,5 3,5 8,5
ExxonMobil 2,5 1,5 1 0 5
Shell 3 1,5 1,5 4 10
Total 3 1 2 4 10
CNPC 1 1,5 1 1 4,5
Eqiunor 3 1,5 1 2 7,5
Petrobras 2 2 1,5 2 7,5
Repsol 2,5 1 1 3,5 8
__________________________________________________________________________________________________
Notes: CCUS - Carbon Capture, Utilization, and Storage - encompasses methods and technologies to remove CO2. The table
is divided into 4 sections which included 11 categories. Each company could get a max of 1 point from each category, in
total 11. One point got a company which supported by strategic investments and/or capital/operational expenditures in
commercial-scale activities; a half point received company which announced strategy and/or minor investments, venture
capital and/or research and development spending; zero means that company has limited evidence of investments activity.
For methane and CO2 emissions, which are not based on project and spending data, assessments reflect the presence and
strength of methane reduction and emissions intensity target, as well as evidence of their implementation, the emission
intensity trend of new investment, transparent reporting of absolute emissions and sources, and linking of executive and
staff compensation to achieving goals. Power generation and efficiency investments in the transition section pertain to
projects destined for commercial sales (not own use). Electrified services include battery storage and EV charging. Low
carbon gases include low-carbon hydrogen and bio-methane.
380
When the financial crisis of 2007–2008 took place,
the price of oil has crashed to 34 USD/bbls. The
second downturn comes in 2016, the global average
price of oil at that time has dropped to 30 USD/bbl -
Fig. 1. While crude oil prices were above 100 USD/bbl,
the ensuing profits were huge for the government as
well as for O&G companies. The second downturn, in
such a short period, brought a very tough time for
oil producers. The prices start barely cover the
average cost to get the oil out of the ground in places
like the United Kingdom. Additional expenses like
taxes took the breakeven price for many projects even
higher, and more complex projects generally fall well
above the average cash cost of production. Oil-
producing nations, from Saudi Arabia to Norway start
cutting down on expenses. The biggest energy
companies like Shell or Chevron have made deep
spending cuts and laid off thousands of workers [39].
Figure 1. Price of Crude Oil Brent with her breakeven price
in different product categories (USD/bbl), SOURCES:
([35],[36])
NOTES: The breakeven price is the real Brent Oil price that
gives an NPV of zero given a real discount rate of 7.5%. The
breakeven price includes only future costs. The lines are an
average of all fields with each category.
Figure 2. Offshore production opex for oil fields in the main
offshore regions (excluded transportation opex),
SOURCE:[37].
In 2015 the average cost of production of one
barrel of oil in a dozen nations was between 8.5USD
in Kuwait to 52.5USD in the UK [40]. That was a total
cost including capital expenditures (CapEx) contains
major purchases that will be used in the future, and
operating expenditures (opex) - an expense,
represents day-to-day costs that are necessary to keep
a business running. The 2016 downturn in oil prices
pushed the whole industry to start looking cuts of cost
on extractions and production level, especially in the
offshore sector, as O&G extraction at sea, is one of the
most expensive (Fig. 1). The major UK offshore
operators changed from two to three weeks crew
rotations on offshore installations. This action brought
a huge salary and logistics savings. All companies
start searching for a way to reduce the cost levels by
closing older fields, changing rotation cycles, and
lowering salaries. As result, the operational
production costs in the all O&G industry have
dropped across the globe (see Fig. 2).
The United Kingdom has become a leader in cost-
cutting in all main offshore regions. In the period of
2014-2018, the UK reduced operational production
costs by 31%, followed by Norway and the United
States with opex reductions of 19% and 15%,
respectively – Fig. 2 [37].
With more efficient maintenance management,
more emphasis on strategic planning, and increased
technology deployment, operating costs per barrel of
oil equivalent (boe) have decreased significantly. The
huge decline is attributed to two main factors: the
decline in the share of production from old fields as
new fields appear while the mature fields were
closed, and the overall increase in global production
[36].
The oil production costs have revealed that the
average breakeven price for all unsanctioned projects
has dropped down to around 35% between 2014 and
2020 [37]. That means, currently (2022), crude oil
production is significantly cheaper compared to a few
years ago, with the new deep-sea investments. This is
more competitive than ever and can provide larger
quantities of products at a lower price. However, the
average breakeven price for most of the sources is
remaining high as the supply segments have
recovered differently with only marginal price
increases.
Comparing the average cost of oil production with
oil price for the last five years – (Fig. 1) noticeable is,
that the offshore O&G companies need a price of oil
above 50 USD/bbl to maintain profitability.
Oil prices below 48 USD/bbl can put many projects
in the “risk zone”. On average global projects are
sanctioned at a breakeven oil price of 35 USD/bbl.
According to Oil and Gas UK (OGUK), 2020 will be
remembered as a “perfect storm” due to COVID-19.
The crisis has decreased demand by approximately 16
million barrels [41], which is unparalleled. The
disagreement between Saudi Arabia and Russia over
production cuts, and consequentially the war for
market share has decimated the industry even further.
The current (2022) sharp rise in oil prices is dictated
by sanctions against Russia and geopolitical reasons.
The market needs stable oil prices, the trends in new
projects and decommissions in O&G and wind
offshore will be more developed in sections 3.2 and
3.3.
381
4.2 Analysis of new-build scrapped and lay-up drilling
units, and their utilization
The sea bed survey continues, and the new O&G
fields are discovered worldwide. When the oil price
was high, the main drilling companies were
expanding their fleets with a significant number of
MODU and support vessels. Finally, when the
following crisis struck and the profitability fell, the
whole market blows out. As hundreds of MODU were
already under construction, lots of companies have
bankrupted, shifted, suspended, or abandoned new
build projects. Fig.3 & Fig.4 presents how the oil
companies used the downturn to refresh their fleets.
Figure 3. The worldwide number of MODU and their
utilization (2001 - 2020) SOURCE: [34]
Figure 4. Change In Global Offshore MODU Fleet
(Competitive Units), SOURCE: [34]
The crude oil price becomes slightly increases after
mid. 2016 and the offshore O&G industry started to
stabilize with less decline in offshore rig count, as
compared to that in 2014 and 2015, and hence, a
similar trend in demand for MODUs. The number of
MODU purchases increased in 2017, both in terms of
transaction and value. Crude oil price crossed 60
USD/bbl in November 2017. The opening of coastal
water in the United States for exploration and
production, and recovery of Brazil's O&G industry,
along with increasing crude oil price, were expected
to increase the demand for MODUs during the
forecast period. Nevertheless, the initial optimism that
the market was back on the rising track has been very
quickly verified.
Despite the global increase in energy demand, the
MODU net change was decreased by another 25 rigs
over 2020. The market is still oversupplied with more
than 200 rigs stacked at the end of 2021. The US Gulf
was the region with the largest number of hot-, warm-
, and cold-stacked rigs, in total 41. Southeast Asia
followed with 38, then South America with 37 [42].
Drilling companies have been waiting for a recovery
that has never taken, and hundreds of units have been
cold stacked since 2016. Many of the idle rigs, in
particular the cold-stacked units, have not worked in
years and are unlikely to return to active drilling.
The worldwide MODU fleet, whose utilization has
been suffering since the previous downturn can
expect a new round of scrapping as a result. One-
quarter of the global floater fleet (22 drill-ships and 37
semi-subs) could be sent for scrapping as Covid-19
accelerates reformation. An evaluation of active rigs
in the global floater fleet reveals that up to 59 of the
213 units are potential candidates for withdrawal
from service [43].
Global demand for MODU just started to recover
before the pandemic but still is expected to remain
under pressure even though oil price starts rising
again. Certainly, weak demand will keep utilization
low unless significant and stable oil price increases are
noticed. Rystad Energy has created three scenarios
[28], analyzing supply and demand in rig years,
which show the range of the expected utilization
levels based on new build rigs and their attrition.
Utilization began dropping in 2015 and has drifted
between 60% and 70% (see Fig.3). Utilization could
reach even 77% in 2023 if all 59 identified floaters are
scrapped and all new build cased – in an optimistic
scenario. If delivery of all new builds takes place then
utilization will decline to 69%. In the last scenario,
which assumes delivery of the new build units but not
full retirement of the identified rigs, utilization could
fall to as low as 52% depending on how many floaters
are withdrawn from the global fleet [28].
As per Fig. 4. since 2015 we can observe a constant
decrease in the global offshore MODU fleet while
utilization is still on the same low level – see Fig.3.
4.3 Analysis between the emergence of new projects and
decommissions in O&G and wind offshore
Since the last downturn, the awarded contracts for
offshore drilling are dropped - Fig.5. The average
annual number of new projects is between 40 and 70
[32].
Figure 5. Offshore EPC Spending and forecast SOURCE:
RigLogix [32] NOTES: EPC - Engineering, procurement, and
construction refer to the steps of developing a major capital
project and the industry/companies who provide these steps
as a service.
Oil companies suspended or shifted new projects
and have been waiting for a recovery. However, the
recovery didn’t take place as the covid-19 brought
another wave of uncertainty on the market.
Nevertheless, to meet the extensive demand for oil
and gas worldwide, governments and private entities
probably will take the initiative to invest in extraction.
The question arises, whether they will be willing to
invest offshore or increase production onshore?
382
International Energy Agency reports that offshore
O&G assets decommissioning is nowadays on average
100 assets per year and that will even increase to 150
assets annually from 2031. As per IEA, Offshore
Energy Outlook, offshore O&G assets wait for a wave
of decommissioning.
Offshore activity is not limited to new investments:
between 2500 and 3000 projects are likely to require
decommissioning between 2020 and 2040 as they
reach the end of their operational lifetime [2].
On the other hand, as per Fig.6. offshore wind
develops dynamically year by year, and the forecasts
show that this trend stands at the same high level to
cross a number of 100 GW [44] produced from
offshore wind globally in 2025. The offshore wind
power service operations industry will enter a period
of dynamic growth, which in turn will stimulate the
huge market demand for Mobile Offshore Wind
Power Service Operations Units (MOWU).
Figure 6. Offshore Wind Capacity Outlook and forecast
SOURCE: Global Wind Energy Council [44]
The policy support, technology advances, and a
maturing supply chain are making offshore wind an
increasingly viable option for renewable-based
electricity generation [45]. Investment has picked up
sharply in recent years. Offshore wind turbines are
becoming giants compared to their onshore
equivalent. The height of commercially available
turbines has increased from 100 meters (m) in 2010
(capable of producing 3 megawatts [MW]) to the 15
MW turbine design - now under development with
260 m highs [13]. Installations are also moving further
from shore, tapping better quality wind resources and
pushing up capacity factors [3]. Aside from lowering
the cost of the electricity produced.
The first projects using floating wind turbines are
also now entering into operation, based on concepts
widely deployed in the offshore oil and gas sector.
DNV launches industry-wide collaboration to develop
the first-ever recommended practice for floating solar
power plants [46]. Cost-competitive floating
technologies would expand the economic resource
base for offshore electricity generation significantly.
Nevertheless, the huge and heavyweight turbines
need big vessels to install either fundament, towers,
nacelle, and wind blades. According to IMO Marine
Safety Committee (MSC) statistics, as of 2021, more
than 60 MOWUs have been constructed and put into
operation worldwide and more than 15 are currently
under construction [47,48]. Due to sustained
construction of offshore wind farms, the current fully
loaded MOWU still cannot meet the needs of the
industry to serve the construction of global offshore
wind farms. There is a clear market demand for this
type of unit.
5 DISCUSION AND CONCLUSION
Due to the constant growth in the global population,
live standards, and usage of electricity in all aspects of
life, the world will need much more energy to meet
the demand. We can observe noticeable progress in
technology advances in offshore drilling as well as in
the renewable sector. As per our analysis during the
last downturns, O&G companies did a lot to cut
expenses as much as possible, and not much place for
cost savings left. The offshore O&G companies still
need an average price of oil above 50 USD/bbl to
maintain profitability.
The current crisis comes at a time when the
industry is recovering from the oil price fall of 2014-
2016. Due to COVID-19 most significant portion of the
world’s economy has aground. The crisis and
pandemic have decreased demand and the offshore
O&G sector is currently unstable due to the
geopolitical situation around Russia. Sustained price
levels below the cost of production can deter
exploration and production and shift production
potential for years to come.
In connection with the fight against climate change
and global warming, the renewable source of energy
is favorable. Offshore wind is becoming competitive
with other renewable energy technologies, with
developments in the full life cycle of processes. The
technology is improving, with larger turbines and
higher turbine ratings. Nowadays, for those
companies which are planning to diversify their
operations, diverting capital towards renewable
businesses requires an attractive investment
opportunity.
As per our study, it is noticeable that all main
O&G companies worldwide have already started
energy transitions and investing in renewable.
However, to reach the targets and ambitions on their
pathways would be required to expand and accelerate
significant changes in overall capital allocation.
The energy ecosystem is evolving. Faced with the
realization that fossil fuels are a limited resource and
the negative impact that their emissions have on the
planet. Oil and gas operators are rising to the future
energy challenges surrounding security and
sustainability. However other drivers are forcing the
transition. The population has their expectations
about how the world will work, as witnessed by new
models for transport, accommodation, and food
delivery. We are moving to a sharing economy. E-
mobility is rising rapidly. Developing countries are
likely to skip a hydrocarbon infrastructure and move
straight to renewable. The electrification of transport
is showing early signs of disruptive acceleration.
Progress in accelerating the transition is seen in the
rapid cost reductions of solar PV and wind (including
offshore). The abatement technologies and alternative
fuels such as green hydrogen are viewed as a potential
game-changer.
383
Figure 7. Resources transfer from O&G to offshore winds
SOURCE: authors conception
The awarded contracts for offshore drilling are
significantly dropped. The offshore O&G assets wait
for a wave of decommissioning. The market is still
oversupplied with more than 200 rigs. As the number
of annual decommissioning is double in size
compared to the new projects and MODU utilization
for the last few years is on the average of 60%, half of
the worldwide fleet very soon could be scrapped. The
COVID-19 only accelerates restructuration.
On the other side, offshore wind projects continue
to develop dynamically which in turn stimulates the
huge market demand for MOWU and other support
vessels. There is a lack of such huge installation units
on the market, and those which are currently under
construction, already have been booked for the long-
term contracts.
If well planned, there is room for mutual benefits
between O&G and wind operators within the offshore
sector (Fig 7.). After many years of experience in
building solid, efficient platforms, the O&G industry
suppliers have a wealth of experience to bring to wind
power. For instant cold stuck MODUs could be
transformed into the MOWU. The parts and
components of one unit can be transferred to the
other. The billions of tons of steel after O&G assets
decommission could be also used for wind turbine
foundations or offshore wind platform substations.
The vessels currently involved in O&G projects, like
cable laying vessel (CBL), dive support vessels (DSV),
remotely operated vehicle vessel (ROV), walk to work
(WTW), offshore support vessel (OSV), crew transfer
vessel (CTV), heavy lift vessel (HLV), anchor handling
tug supply vessel (AHTS) and other tugs, dredgers
and support vessels could be shifted and be on service
for offshore wind projects.
We can expect that some jobs will become
redundant, specifically in Offshore O&G production
as oil extraction at sea is one of the most expensive.
Some of these jobs will be lost, but others could be
saved through re-orientation measures. Shifting to a
renewable-powered future also allows for retaining
existing expertise from the fossil fuel industry.
Particularly for renewable industries such as offshore
wind or offshore floating PV fields. For instance, the
expertise of workers and technicians in building
support structures for offshore O&G could potentially
be used to build foundations and substations for
offshore wind turbines. The structures of demobilized
O&G platforms could be also used partly for wind
farms.
Nevertheless, any future energy transition will
require the further use of all energy sources. For the
time being during the transition period, it is not about
choosing one energy source over another. There is a
need to look to evolve, develop and adopt cleaner
energy technologies that make it possible to meet
expected future energy demand sustainably and more
efficiently. The world needs more concerted legislate
policies action regarding renewable. Until abatement
technologies and alternative fuels took over fossil
fuels, for the time being, liquefied gas would be a
main transition source of energy.
REFERENCES
[1] J. MacGregor, S. Mayekar, and D. Watson, “Semi-
submersible design – A new generation of offshore
accommodation vessels,” Ocean Eng., vol. 172, pp. 759–
787, Jan. 2019, doi: 10.1016/j.oceaneng.2018.11.053.
[2] IEA, “IEA - World Energy Outlook: Offshore Energy
Outlook,” 2018, [Online]. Available: www.iea.org/t&c/.
[3] H. Díaz and C. Guedes Soares, “Review of the current
status, technology and future trends of offshore wind
farms,” Ocean Eng., vol. 209, no. March, p. 107381, 2020,
doi: 10.1016/j.oceaneng.2020.107381.
[4] G. E. Barter, A. Robertson, and W. Musial, “A systems
engineering vision for floating offshore wind cost
optimization,” Renew. Energy Focus, 2020, doi:
10.1016/j.ref.2020.03.002.
[5] United Nations Framework Convention on Climate
Change - “Paris Agreement.” 2015.
[6] DNV GL, “Energy Transition Outlook 2020 - A global
and regional forecast to 2050,” Dnv Gl Energy Transit.
Outlook, p. 306, 2020, [Online]. Available:
https://eto.dnvgl.com/2020/index.html.
[7] OPEC - 2019 World Outlook Oil 2040. 2019.
[8] “IEA - The Oil and Gas Industry in Energy Transitions,”
Oil Gas Ind. Energy Transitions, 2020, doi:
10.1787/aef89fbd-en.
[9] I. Renewable and E. Agency, IRENA - Global
Renewables Outlook: Energy Transformation 2050. 2020.
[10] G. Cao, Z. Chen, C. Wang, and X. Ding, “Dynamic
responses of offshore wind turbine considering soil
nonlinearity and wind-wave load combinations,” Ocean
Eng., vol. 217, p. 108155, Dec. 2020, doi:
10.1016/j.oceaneng.2020.108155.
[11] IEA, “IEA Offshore Wind Outlook 2019: World
Energy Outlook Special Report,” 2019.
[12] Y. Ma, C. Chen, T. Fan, X. Yan, and H. Lu, “Research
on motion inhibition method using an innovative type of
mooring system for spar floating offshore wind
turbine,” Ocean Eng., vol. 223, p. 108644, Mar. 2021, doi:
10.1016/j.oceaneng.2021.108644.
[13] ZERO and ABB, “Floating offshore wind Norway’s
next offshore boom?,” pp. 1–12, 2018, [Online].
Available:
https://new.abb.com/docs/librariesprovider50/media/tv1
012-br-havvind-notat-til-zerokonferansen---
engelsk.pdf?sfvrsn=effbb214_2.
[14] DNV-GL, “Offshore Wind - The Power to Progress,”
2020, [Online]. Available:
https://www.dnvgl.com/publications/offshore-wind-the-
power-to-progress-162051.
[15] UNIDO, “The European Green Deal - Europe’s new
growth strategy A climate-neutral EU by 2050,” 2020.
[16] IMO, “RESOLUTION MEPC.320(74) 2019
GUIDELINES FOR CONSISTENT IMPLEMENTATION
OF THE 0.50% SULPHUR LIMIT UNDER MARPOL
ANNEX VI,” vol. 5, no. 1, pp. 43–54, 2020, [Online].
Available:
https://wwwcdn.imo.org/localresources/en/OurWork/En
vironment/Documents/Resolution MEPC.320(74).pdf.
[17] G. Rutkowski, “Study of Green Shipping Technologies
- Harnessing Wind, Waves and Solar Power in New
Generation Marine Propulsion Systems,” TransNav, Int.
J. Mar. Navig. Saf. Sea Transp., vol. 10, no. 4, pp. 627–
632, 2016, doi: 10.12716/1001.10.04.12.
[18] G. Rutkowski, “Study of New Generation LNG Duel
Fuel Marine Propulsion Green Technologies,”
384
TransNav, Int. J. Mar. Navig. Saf. Sea Transp., vol. 10,
no. 4, pp. 641–645, 2016, doi: 10.12716/1001.10.04.14.
[19] Shell, “Shell Energy Transition Report 2020,” 2020,
[Online]. Available: https://www.shell.com/energy-and-
innovation/the-energy-future/shell-energy-transition-
report.html.
[20] BP, “Energy Outlook 2020,” 2020, [Online]. Available:
https://www.bp.com/content/dam/bp/business-
sites/en/global/corporate/pdfs/energy-
economics/energy-outlook/bp-energy-outlook-2020.pdf.
[21] M. X. Chen Aizhu, “China’s energy giants tiptoe into
renewables,” reuters, 2020, [Online]. Available:
https://www.reuters.com/article/us-china-oil-
lowercarbon-idUSKBN25U1QG.
[22] Sinopec, “Sinopec Annual Report and Accounts 2019:
Strategic Report,” 2019, [Online]. Available:
https://reports.shell.com/annual-
report/2019/servicepages/downloads/files/strategic_repo
rt_shell_ar19.pdf.
[23] “CNOOC Limited Announces.” [Online]. Available:
https://www.cnoocltd.com/art/2020/9/15/art_32091_1530
7421.html.
[24] “Total Energy Outlook 2020,” 2020, [Online].
Available:
https://www.total.com/sites/g/files/nytnzq111/files/docu
ments/2020-09/total-energy-outlook-presentation-29-
september-2020.pdf.
[25] “Chevron corporate sustainability report 2019,”
[Online]. Available: https://www.chevron.com/-
/media/shared-media/documents/2019-corporate-
sustainability-report.pdf.
[26] “Exxon mobile Energy and carbon summary 2020,”
[Online]. Available: https://corporate.exxonmobil.com/-
/media/Global/Files/energy-and-carbon-
summary/Energy-and-carbon-summary.pdf.
[27] “ConocoPhillips Scenario Planning,” 2020, doi:
10.1016/j.chs.2005.07.003.
[28] “Eni Carbon neutrality in the long term,” 2019,
[Online]. Available:
https://www.eni.com/assets/documents/eng/just-
transition/2019/Eni-for-2019-Carbon-neutrality-in-the-
long-term.pdf.
[29] “Aramco strategy flows toward natural gas 2020.”
[Online]. Available:
https://www.aramco.com/en/magazine/elements/2020/st
rategy-flows-toward-natural-gas.
[30] “Saudi Aramco Annual Report,” 2019, [Online].
Available: https://www.aramco.com/-
/media/publications/corporate-reports/saudi-aramco-
ara-2019-english.pdf.
[31] “Rystad Energy,” 2020.
[32] “RigLogix,” 2021, [Online]. Available:
https://www.westwoodenergy.com/riglogix.
[33] “IHS Markit,” 2020, [Online]. Available:
https://ihsmarkit.com.
[34] P. As, A. S. Section, and D. C. Magazine, “Tomorrow ’
s drilling rig , today .,” no. December, 2020.
[35] “tradingeconomics.com,” 2021, [Online]. Available:
https://tradingeconomics.com/commodity/brent-crude-
oil.
[36] “rystadenergy.com,” [Online]. Available:
https://www.rystadenergy.com/newsevents/news/press-
releases/oil-production-costs-reach-new-lows-making-
deepwater-one-of-the-cheapest-sources-of-novel-
supply/.
[37] “rystadenergy.com,” [Online]. Available:
https://www.rystadenergy.com/newsevents/news/press-
releases/operational-production-costs-have-fallen-
globally/.
[38] “Oil Price,” [Online]. Available: https://oilprice.com/.
[39] “graphics.wsj.com,” 2021, [Online]. Available:
http://graphics.wsj.com/oil-barrel-breakdown/.
[40] “money.cnn.com,” 2021, [Online]. Available:
http://money.cnn.com/interactive/economy/the-cost-to-
produce-a-barrel-of-oil/index.html?iid=EL.
[41] “oilprice.com,” [Online]. Available:
https://oilprice.com/Energy/Energy-General/North-Sea-
Oil-Faces-Crisis.html.
[42] “offshore-mag.com,” [Online]. Available:
https://www.offshore-mag.com/rigs-
vessels/article/14168493/top-10-drilling-rig-contractors-
look-forward-to-new-year-with-cautious-optimism.
[43] “Rystad Energy,” 2020, [Online]. Available:
https://www.rystadenergy.com/newsevents/news/press-
releases/one-quarter-of-the-global-floater-fleet-could-be-
scrapped-as-covid-19-accelerates-restructuring/.
[44] “Global offshore Wind Report 2020 by Global Wind
Energy Council,” 2020.
[45] G. Rinaldi, P. R. Thies, R. Walker, and L. Johanning,
“A decision support model to optimise the operation
and maintenance strategies of an offshore renewable
energy farm,” Ocean Eng., vol. 145, pp. 250–262, Nov.
2017, doi: 10.1016/j.oceaneng.2017.08.019.
[46] DNV-GL, “First ever recommended practice for
floating solar power plants,” 2020, [Online]. Available:
https://www.dnvgl.com/news/dnv-gl-launches-
industry-wide-collaboration-to-develop-first-ever-
recommended-practice-for-floating-solar-power-plants-
177287.
[47] Formela K., Neumann T., Weintrit A.: Overview of
Definitions of Maritime Safety, Safety at Sea,
Navigational Safety and Safety in General. TransNav,
the International Journal on Marine Navigation and
Safety of Sea Transportation, Vol. 13, No. 2,
doi:10.12716/1001.13.02.03, pp. 285-290, 2019
[48] IMO Maritime Safety Commiittee, “Proposal for a new
output to set Standards for Mobile Offshore Wind Power
Service Operations Units MSC 104/15/22,” 2021.
