By Barney Smith
Last week BP announced that they had won two projects in the recent German tender round, (almost doubling BP’s current global offshore wind pipe-line to 9.2 GW) for which BP are to pay a total of Euros 6.8 billion to the German authorities for the right to develop them as large offshore wind projects. An initial payment of 10% of the bid amount is due to be paid by July 2024. The rest is payable over a 20-year period as and when the projects become operational.
The two North Sea sites, located 130km and 150 km offshore in water depths of about 40 metres, have a total potential generating capacity of some 4 GW. Subject to receiving the necessary permits and approvals, these would be BP’s first offshore wind projects in Germany. BP will lead the development, construction and operation of these fixed bottom offshore wind projects, with grid connection targeted by end 2030.
BP have been at pains to emphasise that this opportunity is fully aligned with their integrated strategy to turn their Oil and Gas company into an energy company and fits within the company’s disciplined capital allocation framework. The renewables projects should return between six and eight per cent, according to Anja-Isabel Dotzenrath, BP’s Executive Vice President for Renewables and Low Carbon energy.
The Financial Times tells us that the other two projects in the German round were both won by Totalenergie, the French-based major Oil and Gas Company. The combined potential generating capacity, at 3 GW, is somewhat less than the 4 GW envisaged by the two BP projects. Curiously, Totalenergie also shares BP’s public commitment to the transition of their (Oil and Gas) company into an integrated energy company in due course.
The projects reaffirm BP’s view of the German market as one of fundamental importance. Not only will they be BP’s first wind projects in Germany, they will be its first projects anywhere in continental Europe and the company sees them as a huge milestone for their German operations in that they clearly mark BP as entering the German off-shore wind market.
They will also help accelerate the pace of transformation of BP in Germany more generally. “The renewable power we aim to produce will anchor the significant demand we expect for green electrons for our German operations, from a whole host of products and services, including green hydrogen and biofuels production, electric mobility growth and refinery decarbonisation.”
Furthermore, this announcement gives the lie to the theory that the energy crisis had weakened the British Majors’ commitment to decarbonisation, a theory which has been” live” ever since the announcement by the CEO, Bernard Looney, back in February that BP was reducing the speed of its transformation out of Oil and Gas. This was understandable in the face of record profits then being announced, but BP maintained that investing in renewable power was as important as it has ever been. This is the first sizeable renewables project since then for the company to reiterate the point.
Contrary to the way it is sometimes portrayed, big renewables projects do not occur every day.