The shift from fossil fuels to renewables will not happen overnight. It is not simply a question of out with the old, in with new. It will be a gradual process influenced by a myriad of factors, from international frameworks, oil prices and financing to cost levels, technological development and mindset.
To achieve this energy transition, diversification – the ability to move into new markets or industries – will be vital. Expertise in existing sectors can be used and synergies exploited to create innovative solutions in new sectors.
Diversification to offshore wind
The diversification from offshore oil and gas to offshore wind is a prime example here, and can be seen along the entire value chain in Norway.
Major players are leading the way. Equinor, for example, is using its decades of offshore oil and gas experience to develop its innovative floating platform technology for offshore wind, Hywind. Meanwhile, Ulstein has expanded its ship design portfolio to include service operations vessels for offshore wind farms, alongside special-purpose vessels for offshore oil and gas.
Smaller supply companies are also branching out. Uptime, for instance, delivers compensated gangways to both the oil and gas and offshore wind markets. An increasing number of such companies find that their oil and gas solutions can be adapted to new markets.
An expanding market
This move towards offshore wind is not only an environmental imperative -- it is also good business. According to the International Renewable Energy Agency, the global potential of offshore wind is currently 100 GW by 2030.
A 2017 report commissioned by Norwegian Energy Partners focuses specifically on Norwegian supply chain opportunities in offshore wind. Current market projections suggest that EUR 100 billion will be spent between 2017 and 2025 in the European offshore wind industry alone.
Clearly, companies that begin diversifying early will reap the benefits.
Keeping the baby
Although the ultimate aim is to end our dependency on fossil fuels, research shows it would be a great waste to throw the baby out with the bathwater. The Norwegian oil and gas sector possesses a wealth of expertise, products and services that can be adapted for offshore wind, offshore aquaculture, carbon capture and storage, hydrogen and the like.
In recent years, several groups of researchers at the Centre for Technology, Innovation and Culture at the University of Oslo have studied companies along the value chain in the petroleum sector and their forays into new markets – one of which is offshore wind. The researchers explore the situation from various perspectives, including the technological and the market-related.
According to the authors of one study, six out of 10 dedicated offshore wind companies in their survey reported that their activities draw on experience from offshore oil and gas.¹ Offshore wind requires specialised skills, equipment and services. Thanks to technology overlap, notably in the maritime and subsea areas, it is not an insurmountable step for oil and gas companies to adapt and redeploy their existing technologies in offshore wind. This makes it an attractive industry to enter.
Diversification to offshore wind is also attractive from an economic perspective, as activities in the oil and gas sector can be reorganised relatively quickly in response to fluctuations in market conditions.
Thus, in addition to opening up new business opportunities, diversification may enable companies to reduce dependence on a single market and to reorient and distribute resources between markets according to the situation – retreating from or returning to their core market. ²
Necessity is the mother of invention
When it comes to petroleum supply firms, researchers point out several challenges that have to be surmounted when diversifying from offshore oil and gas to offshore wind. One of these challenges is the way technology development takes place. Development in the oil and gas sector has primarily been responsive – oil companies approach suppliers with specific problems that they want solved under a specific set of circumstances.
This model of technology development and level of customisation is not found in offshore wind power, where suppliers are expected to develop a product internally that complies with relevant standards, and only then approach potential buyers. This requires a higher technology readiness level and brings with it a greater risk burden. However, companies have been able to work around this by defining what they are good at in more a generic way, for example marketing themselves as experts in managing large-scale projects in general – not just large-scale oil and gas projects.³
Regardless of what kind of problem they are trying to solve – whether it is a technical issue on an offshore service vessel or a pressing global challenge – Norwegians have demonstrated that they excel in identifying the problem, rolling up their sleeves, and doing what it takes to fix it. Necessity is, after all, the mother of invention.
“Established sectors expediting clean technology industries? The Norwegian oil and gas sector’s influence on offshore wind power”. Journal of Cleaner Production. Vol. 177, s. 813- 823. Tuukka Mäkitie, Allan D. Andersen, Jens Hanson, Håkon E. Normann, Taran M. Thune (2018). Centre for Technology, Innovation and Culture, University of Oslo.
“The green flings: market fluctuations and incumbent energy industries’ engagement in renewable energy”. Tuukka Mäkitie, Håkon E. Normann, Taran M. Thune, and Jakoba Sraml Gonzalez (2018). Centre for Technology, Innovation and Culture, University of Oslo. TIK working papers on innovation studies. https://ideas.repec.org/s/tik/inowpp.html
“Challenges for diversification into new markets for petroleum supply firms”. Allan Dahl Andersen and Magnus Guldbrandsen. Centre for Technology, Innovation and Culture, University of Oslo. Forthcoming in Thune, Engen & Wicken (2018): Transformation in the Petroleum Innovation System: Lessons from Norway and Beyond (Routledge, 2018).