The International Energy Agency(IEA) released its Offshore Energy Outlook report, looking at all aspects of offshore energy production for the next 20 years. While over a fourth of today’s oil and gas supply is provided by offshore operations globally, oil production has remained relatively stable at 27 million barrels per day, and natural gas production increased by 50% since 2000. While wind powered electricity has increased rapidly, mainly due to wind turbines in the North Sea, it has been a marginal increase of 0.2%. Setbacks to offshore production have been the 2010 Deepwater Horizon accident, the shale revolution’s role in lower prices, and the longer-term uncertainties over demand.
In looking ahead, the report frames the discussion around two scenarios based on various assumptions regarding governmental policies that may be put in place globally. The New Policies Scenario considers the existing energy policies and likely implementation of announced policy commitments. This scenario leans toward significant progress in meeting global energy and environmental goals, but is not in line with the Paris Agreement carbon dioxide emissions goal. The Sustainable Development Scenario looks at the goal of meeting the United Nations 2030 Agenda for Sustainable Development (meeting climate change goals consistent with the Paris Agreement, major reductions in pollutant emissions, and universal access to modern energy), and works backward to achieve these goals. While the two paths are different, the level of overall offshore energy investment activity is projected to be high in both scenarios.
The report indicates that in both scenarios, energy-related offshore activity will increase, although at varying levels. In the New Policies Scenario, natural gas becomes the largest component of offshore energy, with oil increasing, and offshore wind power generation increasing by more than ten times by 2040. The Sustainable Development Scenario predicts oil, gas and offshore wind investments will be roughly equal, with offshore electricity generation from wind growing twice as fast, providing 4% of global power generation by 2040.
Offshore oil and gas projects will be re-engineered in response to the oil and gas lower prices. With the decline in oil prices in 2014, many proposed offshore projects were delayed or cancelled. They are now coming back with simplified, standardized, and downsized versions to be more economical. Deepwater exploration will increase in both scenarios, with gas remaining robust in the Sustainable Development model, but a decline in oil demand will affect capital-intensive offshore oil projects.
Along with new investment in offshore activities, between 2,500 and 3,000 projects may be decommissioned now through 2040. Removing offshore infrastructures has been seen as the best way to minimize environmental and safety issues, but there has been some re-use or re-purposing opportunities, as well as converting areas to permanent artificial reefs. Potential synergies with other ocean industries and offshore wind are being discussed.
Investments in offshore wind power generation will pick up with policy support, technology advances, and a maturing supply chain. Increasing the size of the turbines, moving further offshore to tap better quality wind resources, and cost-competitive floating wind turbines will all help in making offshore wind more competitive.
The integration of the energy sectors could be beneficial in lowering costs, improving the environment, and efficiency in infrastructure use. There are overlapping competencies in construction and maintenance of offshore projects in harsh marine environments that could have major synergies for offshore wind projects with the oil and gas supply chain. Electrifying oil and gas operations with floating wind turbines could help reduce carbon dioxide and air pollutants from diesel or gas-fired engines. Offshore infrastructure, once it reaches the end of its operational life, could be repurposed as offshore bases for wind farm maintenance, facilities for power conversion or for injecting carbon dioxide into depleted fields.
The report provides an overview of current offshore energy production, an analysis of offshore energy production under the two scenarios, opportunities and challenges for investment, and a discussion of an integrated, synergistic approach to offshore energy production.
To read the report in its entirety, it can be found on IEA’s website.