Capital expenditure in the offshore wind sector will match that in the upstream oil and gas industry in Europe in 2021 and surpass it in 2022, according to analysis by Rystad Energy.
The analyst said the oil market collapse caused by the Covid-19 pandemic is set to delay several oil and gas developments in Western Europe, putting capital expenditure in the sector on a continued downwards trajectory through 2022.
In light of the postponement of multiple final investment decisions on projects and lower investments in offshore oil and gas, coupled with increasing activity in the offshore wind sector, Rystad Energy said it expects that the two markets will reach parity as soon as next year.
“We anticipate that capital expenditure (capex) on offshore wind will surpass upstream O&G spending in Europe in 2022,” it added.
Capex in offshore wind in Europe surpassed the $10bn mark in 2015 and has since hovered in the range of $10bn to $15bn per year, Rystad Energy said.
Annual capex levels are expected to rise to about $13.8bn in 2020, $18.2bn in 2021 and more than $22bn in 2022 from approximately $11.1bn in 2019, the analyst said.
The abundant oil supply and reduced demand have taken their toll on the oil price, and consequently annual capex towards upstream offshore oil and gas in Europe is expected to decline from more than $25bn in 2019 to less than $17bn in 2022, it added.
Rystad Energy project manager for offshore wind Alexander Flotre said: “Offshore wind development in Europe is expected to flourish in the coming years as countries strive to reach their ambitious 2030-targets – and large investments will be required.
“Commissioning activity is expected to increase towards 2025, and projects expected to be operational in 2023-2025 are already driving up capital expenditure in 2020. This trend will continue in the coming years.”