Three weeks ago, Shipping Intelligence Weekly considered the effect of global efforts to moderate climate change, and the potential maritime impacts of ‘energy transition’ and decarbonisation (see SIW 1,422, 15th May 2020). This week’s Analysis continues the story, looking at scenarios for the future shape of energy production offshore which may play out as patterns of world energy use evolve.
Global Energy In Transition
The framework we introduced in SIW 1,422 suggested two potential future global energy scenarios, based on a range of assumptions. In our “gradual transition” scenario global energy supply would grow by 4.1 btoe (billion tonnes of oil equivalent) to just over 18 btoe by 2050. In our “rapid decarbonisation” scenario, with supply growth muted by greater energy efficiency to 1.8 btoe, total supply would be just under 16 btoe in 2050.
The graph shows the offshore context in more detail. In 2019, offshore oil and gas accounted for 17% of world energy. Offshore wind was <0.1% in global terms, though is growing quickly. 27% of oil was produced offshore (1,247 mtoe, 25m bpd), 53% of offshore energy. Meanwhile, 33% of gas was produced offshore, though a lower absolute volume than offshore oil in energy terms (1,092 mtoe, 125bn cfd), and 46% of offshore energy.
Strengthening Wind Offshore
Given the greater technical challenges involved relative to onshore farms, and the youth of the industry, offshore wind equated to only 7% of overall wind energy output in 2019, or 20 mtoe. However, the growth rate of offshore wind has been impressive, with capacity growth of 23% p.a. 2009-19, and production growth estimated at 40% p.a. Indications are that this growth is set to continue at robust rates, current Covid-19 uncertainty notwithstanding, as the sector globalizes and benefits from experience. Our selected scenarios show 12-13% average p.a. growth in offshore wind output to 2050, to a 4-6% share of global energy, and a 16% (gradual transition) to 29% (rapid decarbonisation) share of offshore energy output. The effect on asset demand (currently ~600 vessels) may be less acute, with wind likely to be less vessel-intensive than oil and gas, though a new generation of installation units is likely to be needed for the turbines of the future.
Oil & Gas Scenarios
Energy transition, potentially “amplified” by Covid-19, also looks set to have lasting effects on offshore oil and gas. In our scenarios, offshore gas could benefit as a low-carbon ‘transition’ fuel, combined with the existence of large undeveloped reserves. Offshore oil could face a more challenging future, though what remains may offer deeper water opportunities. In a ‘gradual transition’, offshore oil and gas could peak in the 2040s, and by 2050 would still be 18% of global energy, and 84% of energy offshore (oil 38%, gas 46%). ‘Rapid decarbonisation’ would bring swifter change, with offshore oil and gas peaking in the late 2020s, and down to 14% of global energy, and 71% of offshore energy by 2050 (oil 23%, gas 49%).
So, offshore oil and especially gas can still play a notable role if they can remain competitive. However, the largest impetus may come from the fast-growing offshore wind sector. Regardless, the green transition will be pivotal in determining the future shape of offshore energy.
The author of this feature article is Calum Kennedy. Any views or opinions presented are solely those of the author and do not necessarily represent those of the Clarksons group.
