It is no accident that those traditional oil and gas companies which shifted investment and skills towards the renewable energy market are the same firms now celebrating big offshore wind contracts.
As an invisible global virus looks set to rewrite the script on the future of many North Sea projects, companies which placed their chips on green energy now have an additional, and potentially less unpredictable, sector to ballast their business during these turbulent times.
Global engineering firm Petrofac, alongside Italian oil and gas contractor Saipem, looked to the sector early and as a result were awarded work on two of the North Sea’s next big wind developments.
Petrofac, which has a major operating base in Aberdeen, bagged a multi-million-pound contract with SSE on its giant 120-turbine Seagreen wind project, while Saipem has already kicked off work as the main contractor on EDF’s £2 billion Neart na Gaoithe (NnG) project off the east coast of Scotland.
Yet John Pearson, chief operating officer for Petrofac’s engineering and production services (EPS) division, claims while the Covid-19 pandemic has certainly had the effect of “sharpening the mind”, his firm had already set the ball in motion on the energy transition.
“We’ve been pretty active in the energy transition since 2008, so it’s not a reactive thing for us”, he said.
“We started in offshore wind because we realised that there was a good addressable market that needed the type of skills that we had.
“And we’ve done a good job of building up a position in areas where we can really add value.
“We’ve been focusing on offshore substations, which are incredibly heavy pieces of kit that need to be built to incredibly fine tolerances, and we’ve done pretty well out of that.”
Pearson has been leading Petrofac’s charge into the clean energy market for a few years and believes digital technology has played a significant part in its success in driving efficiencies and snapping up work.
He claims the double whammy experienced by the oil and gas industry only puts into sharper focus the things that his firm does well.
“Sometimes we all need a nudge to adopt new things,” he said.
“And I have a firm hope that proven technologies that we’ve used to halve the cost of doing routine operations and maintenance will really take off in the next year.
“Covid-19 is a life-threatening and very serious thing, but to use the old saying ‘don’t waste a crisis’, if we are wise coming out of this I think there will be some incredibly useful trends that will serve the industry over the next couple of years.
“If you have done good stuff and been efficient, then those skills are really in demand right now.”
In the case of Milan-headquartered Saipem, it was the 2014 oil crash that marked a turning point in its strategy, with the weight of its non-oil projects today exceeding 70% of its engineering and construction backlog.
The firm’s concern that the new slump in oil demand could become permanent has forced it to be even more bullish in its hunt for new renewable energy contracts.
A spokeswoman for the firm said: “The oil and gas industry needs a change in strategy, while service companies like us have already been adapting their business to the new paradigm. We shifted from being an EPC contractor to becoming a sustainable and diversified developer and provider of solutions.
“We have to look ahead and anticipate trends in order to support our customers in their greener journey from project inception.”
However, according to Pearson, Petrofac isn’t going to be rushed into any wholesale shift in its plans as a result of the fallout from the coronavirus outbreak.
But he was keen to point out that, as a global firm, Petrofac is looking into every potential energy transition market.
He said: “While the Covid-19 pandemic has sharpened the mind, the energy transition was a vital part of our strategy before this crisis, not a reaction to the crisis.
“Fundamentally, I think it’s a really good and growing market that we can really offer something to, that’s what gets me excited about it.
“We’re fortunate as a global contractor that we can address the global market.”
While Pearson claims he will be approaching clean energy in a “targeted fashion”, he is acutely aware of how quickly the energy sector was shifting before the Covid-19 pandemic, and could ramp up during the recovery.
He said: “It’s called the energy transition for a reason and we need to recognise that the world needs oil and gas for a long time yet, but a portion of that will quite rightly decline, and we need to position ourselves smartly in that transition. It’s been an evolving story but the pace has quickened over the last 18 months.
“We were thinking about the acceleration of our energy transition activities long before the oil price crash and Covid-19.
“And the logic that was driving us there is as sound today as it was before this crisis.”
With an offshore wind contract already in the bag in Germany and one to come in Scotland, Pearson claims his firm is looking seriously at another energy transition area: Carbon capture, usage and storage (CCUS)
He said: “CCUS is a great example and an absolute central part of what any country should be doing in the energy transition.
“We’ve had a few false starts in the north-east and there are only a finite number of projects.
“But if we position ourselves well on a couple of the initial developments, then it will enable us to deploy those skills around the world.”
Yet despite his global outlook, Pearson can’t resist looking towards the opportunity for Scotland as a sizable renewable energy sector begins to take shape both on land and off the north-east and Highland coastlines.
He believes that it is “imperative” that Scotland, and especially Aberdeen, use the skills and knowledge gleaned from being an oil and gas powerhouse for decades.
He said: “It felt like there was a tipping point in 2019 where the broader energy transition space definitely changed gear.
“I think, societally and governmentally, things are changing as industry responds to those changes – companies need jobs to focus on the fact that the renewable energy market is becoming a more tangible market.
“It’s massively important for the people of Scotland and for companies.
“What a waste it would be if we don’t take advantage of the skills base we’ve built up over 30, 40 years with fantastic engineers, technicians and operators – we must maximise the opportunity.
“All it needs is a retooling of those skills, because there are points of difference, but there are huge points of similarity.
“If we do this right we can have a vibrant engineering and technical industry for a great many years to come.”
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