he vicissitudes of the oil and gas markets make it critical for firms to diversify into adjacent areas sooner than later. Renewables, as a business segment, serves not just as a risks cushion, but a potential growth catalyst. This makes good business sense as offshore renewable energy is another major greening trend. This is a global market with great market potential.
Offshore wind accounts for the largest proportion of offshore renewable energy supply. The installation of offshore wind parks is an extremely complex and challenging engineering challenge. The trend is for continuously larger wind turbines to be placed further out to sea, making the entire support and installation infrastructure more complex. These developments bode well for shipyards and service providers to windfarm operators. Companies with an edge - in areas such as offshore design, engineering and construction capabilities to develop solutions across the value chain of offshore wind farms - can uncover opportunities in times of crisis.
First major wind farm project since 2010
Keppel O&M returns to the fray with a big bang. Its wholly-owned subsidiary, Keppel FELS Ltd won a contract to build converter stations for TenneT Offshore GmbH, a grid operator in the Netherlands and Germany. It is Keppel O&M’s first major project in the renewable energy sector since 2010.
Chief Executive of Keppel O&M Chris Ong said, ‘‘We see opportunities in this segment as the offshore renewables market is expected to increase significantly over time with increasing concerns over climate change.’’
Taiwan beckons with opportunities which our companies are quick to seize. Sembcorp Marine Offshore Platforms Pte Ltd was contracted to fabricate 15 jacket foundations for the Formosa 2 Offshore Wind Farm, Taiwan’s largest offshore wind farm. Keppel FELS also have a presence in Taiwan where it will partner with Danish renewable company, Ørsted, to produce offshore wind farm substations.
Offshore mainstays stay the course
Sembmarine has capped off 2019 with exciting contract wins to provide offshore infrastructure to the Whale, Al Shaheen and Tyra fields. The Whale Field project is its second contract from Shell in two consecutive years. Keppel O&M completed and delivered a series of rigs to several repeat clients.
The COVID-19 pandemic has shattered demand for oil and plummeted prices to historical lows. At current prices, exploration and production companies have little economic incentive to search and drill for oil. Around the world, customers have cut down on their capital expenditures and a wave of project cancellations have created a gloomy credit outlook for offshore companies including our own.
Based on IEA Oil Market Report (OMR) April 2020, global capital expenditure by exploration and production companies in 2020 is forecasted to drop by about 32% versus 2019. A report by Baker Hughes in April 2020 shows that the number of active rigs drilling oil around the world fell by 29 per cent in April year-on-year. OECD has also warned that global growth is set to weaken this year and only recover gradually in 2021. However, the gradual reopening of large economies has lifted sentiment, creating expectations that oil demand will eventually increase. This cautiously optimistic outlook gives reasons for yards to anticipate the normalisation of capital expenditures on rigs and submersibles in 2021.