OGV Energy's Europe Energy Review – March 2021

Oil and gas exploration policies, updates from oil majors about their strategies in the energy transition, renewables power generation milestones, and many deals in the renewables industry in the UK and the rest of Europe were the highlights of the European energy themes at the start of 2021.

Oil & Gas

Ireland’s Government said in early February it would introduce legislation to ban new oil and natural gas exploration and extraction.

“The decision we have made today to legislate for a ban on new oil exploration and extraction will send a powerful message, within Ireland and internationally, that Ireland is moving away from fossil fuels towards a renewable future,” said Eamon Ryan, Minister for the Environment, Climate and Communications.

Western Europe’s biggest oil and gas producer, Norway, awarded 61 offshore exploration licenses to 30 companies in the latest annual licensing round for oil and gas exploration in mature areas on the Norwegian Continental Shelf. Equinor, Lundin, Aker BP, and Vår Energi were awarded the highest number of licenses either as operators or partners.

“This year’s award of 61 new production licences to as many as 30 companies shows that the petroleum industry still has significant expectations of making profitable discoveries on the Norwegian Shelf,” said Kalmar Ildstad, director license management at the Norwegian Petroleum Directorate.

Norway’s Equinor said at the end of January that its giant Johan Sverdrup oil field is expected to increase its daily production capacity up to 535,000 barrels of oil by mid-2021. This is around 100,000 barrels per day more than the original basis at start-up in October 2019.

Equinor also announced its first discovery for 2021, made near the Troll field in the North Sea. The Røver North discovery adds to a number of discoveries in the Troll/Fram area in recent years.

Shell confirmed that its oil production peaked in 2019, as it accelerates its net-zero emissions strategy. The supermajor expects its oil production to gradually decline by around 1-2% each year, including divestments and natural decline. In the upstream, Shell will focus on value over volume, which is set to continue to provide material cash flow into the 2030s.

France’s Total also reiterated its transformation toward a broader energy company and plans to change its name to TotalEnergies to reflect the two pillars of its strategy, LNG and electricity from renewable energy sources.

Aker BP, however, will remain a pure-play oil and gas company and will contribute to the energy transition through maximising value creation, minimising emissions, and by sharing of data and competence to other industries.

“The operational performance has never been stronger, the financial position has never been more robust, and our investment opportunities have never been more attractive to pursue,” CEO Karl Johnny Hersvik said on the capital markets update in early February.

Renewables

Renewables overtook fossil fuels for the first time to become the UK’s largest source of electricity over the whole year in 2020, Drax said in its latest Electric Insights quarterly report.

Together wind, solar, hydro, and biomass provided 104 TWh of electricity, or 39% of all power consumed in Britain. Renewable output has increased tenfold since 2010, while fossil-fuelled output has fallen by 60%. In 2020, supply from coal, gas, and oil fell to below 100 TWh for the first time since 1960, the report noted.

In the European Union, renewables also overtook fossil fuels to become the EU’s main source of electricity for the first time in 2020, according to the annual report of Ember and Agora Energiewende. Renewables rose to generate 38% of Europe’s electricity in 2020, up from 34.6% in 2019, for the first time overtaking fossil-fired generation, which fell to 37%, the report showed.

Floating offshore wind in the UK could reach “subsidy-free” levels by the early 2030s, a study completed by the Offshore Renewable Energy (ORE) Catapult’s Floating Offshore Wind Centre of Excellence (FOW CoE) showed.

The study suggests large floating offshore wind projects could secure Contracts for Difference (CfD) strike prices below current wholesale electricity price forecasts as early as 2029, depending on the deployment scenario pursued by the UK.

Globally, offshore wind capacity installations are set to jump by 37% this year, following 15% growth in 2020, Rystad Energy has estimated. Last year, China was the main contributor to offshore wind installations growth, accounting for 39% of additions, followed by the Netherlands with 18% and the UK with 17%.

Global installed offshore wind capacity is set to increase by 11.8 gigawatts (GW) in 2021, adding to the 31.9 GW of installed capacity at end-2020, Rystad Energy reckons.

Europe invested a record 26 billion euro (US$31 billion /£22.6 billion) in new offshore wind farms in 2020, which is set to finance 7.1 GW of new offshore wind to be built in the coming years, WindEurope said in early February. Europe now has 116 offshore wind farms across 12 countries, with 40% of the capacity in the UK, the association said.

bp and Total were among the successful bidders in the UK’s offshore wind leasing round 4. The Crown Estate announced six proposed new offshore wind projects in the waters around England and Wales, which together represent just under 8 GW of potential new offshore wind capacity.

bp and partner Energie Baden-Wuerttemberg AG (EnBW) of Germany were selected as the preferred bidder for two highly-advantaged 60-year leases with 3 GW of generating capacity in the round, the first such UK leasing round since 2010.

“We are fully confident that these highly advantaged resources will deliver – at a minimum – the 8-10% returns we demand of our renewables investments,” bp chief executive Bernard Looney said.

A 50/50 joint venture between Total and Macquarie’s Green Investment Group (GIG) also secured rights in that round. The Total-GIG project, which will be located off the UK’s East Anglian coast, could deliver up to 1.5 GW of renewable electricity.

“This project is our largest renewables development in Europe to date and an important step toward our 2050 net zero ambition”, said Julien Pouget, Senior Vice President Renewables at Total.

Another major oil company, Shell, also enhanced its diversification by agreeing to buy ubitricity, the largest public EV charging network in the UK.

Denmark reached an agreement to build the world’s first wind energy hub as an artificial island in the North Sea. The hub, to be owned by a public-private partnership, will be able to cover the consumption of 10 million European households, once fully completed.

“It will make a big contribution to the realisation of the enormous potential for European offshore wind, and I am excited for our future collaboration with other European countries”, said Dan Jørgensen, Danish Minister for Climate.

Scottish and Southern Electricity Networks (SSEN) Distribution opened a call for evidence to find ‘shovel-ready’ green projects that can be accelerated by network investment over the next two years.

A team led by London South Bank University (LSBU) has launched what it says is a world-first research project to develop a new way of recovering waste heat from industry and decarbonise heating and cooling through new hydrogen technologies.

“Our study will investigate new ways that industry can reuse waste heat and convert it for use in heating and cooling. About 60% of total waste heat produced in the UK by industry could potentially be reused,” said Professor Yunting Ge, LSBU Professor of Building Services Engineering.

Following a competitive tender, the Scottish Government has awarded the European Marine Energy Centre (EMEC) a contract to explore opportunities for floating offshore wind and hydrogen supply chains in Scotland and France.

EMEC is also collaborating with Highlands and Islands Airports Limited (HIAL) to decarbonise heat and power at Kirkwall Airport through green hydrogen technology. The project, funded by the Scottish Government via Highlands and Islands Enterprise, will see a novel hydrogen combustion engine, provided by Doosan Babcock, installed and demonstrated at Kirkwall Airport in Orkney in 2021.

Scotland-based Global Energy Group (GEG) and Rosetti Marino, headquartered in Italy, have created a strategic partnership to execute large-scale renewable energy and energy transition EPC and EPCI contracts in the UK.

Ørsted has taken the final investment decision on the Danish demonstration project H2RES, which will use offshore wind energy to produce renewable hydrogen. The project is expected to produce its first hydrogen in late 2021 and will be Ørsted’s first renewable hydrogen project in operation.

Iberdrola plans to invest more than 1 billion euro (US$1.2 billion / £870 million) in the first industrial-scale floating offshore wind farm in Spain, expected to generate 300 MW of clean energy off the Spanish coast.

Mitsubishi Heavy Industries (MHI), Shell, Vattenfall, and municipal company Wärme Hamburg have signed a letter of intent to plan how they can jointly produce hydrogen from wind and solar power at Vattenfall’s Moorburg power plant site in Hamburg and utilise the hydrogen in its vicinity.

Read the latest issue of the OGV Energy magazine HERE.