oil and gas diversification: high potential areas, key challenges (operations ... · 2016-10-10 ·...

BVG Associates ~ Alan Duncan

Oil and Gas Diversification: High Potential

Areas, Key Challenges (Operations &

Maintenance)

Presentation coverage

Agenda Serving both O&G and Offshore Wind: a marriage made in heaven or a marriage of convenience ?

BVGA ~ Selected clients

BVG Associates

Business advisory

• Analysis and forecasting

• Strategic advice

• Business and supply chain development

Technology

• Engineering services

• Due diligence

• Strategy and R&D support

Economics

• Socioeconomics and local benefits

• Technology and project economic modelling

• Policy and local content assessment

• The European opportunity: offshore wind market

size and key big picture challenges

• Ease of diversification: high potential areas of

supply

• Journey to subsidy free : the all encompassing

cost challenge

• Operations and maintenance: overview and

challenges

• Final thoughts: how to position your company for

success

Developmentand project

management

Wind turbine supply26%

Balance of plant19%

Installation and commissioning

14%

Operation, maintenance and service

39%

Project other

1.5%

1%Turbine

assembly

7%

2%

8%

4%

4%

Subsea export cables2%

1%

6%

9%

1%Installation ports

0.5%

2%

4.5%4%

3%

Operation, maintenance and minor service

20%

7%

12%

Blades

Castings and forgings

Drive train

Tower

Turbine other

Subsea array cables

Substations

Balance of plant

other

FoundationsInstallation

otherSubsea cable

installationFoundation installation

Turbine installation

OMSother

Major service

Wind farm design

Surveys0.3%

Source: BVG Associates

2%

0.2%

0

10

20

30

40

50

0

1

2

3

4

5

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25

Cum

ula

tive in

sta

lled c

ap

acity (G

W)

Insta

lled c

apacity (G

W)

Year of turbine installation

DE DK FR NL UK Other Europe Cumulative

Typical cost breakdown for a UK Round 3 project. CAPEX ~65% of

lifetime costs. Typical lifetime cost estimate is £3.6m per MW / £1.8bn

for a £500MW windfarm.

• New capacity deployment in UK likely to run at 1 -

1.5GW through 2020’s.

• DE likely to remain #2, NL and FR to deploy at

pace from around 2020.

• Cost driven largely by site conditions, can be

split into 35 broad sub-elements with O&M the

largest at almost 40%.

• With 7700 turbines installed by 2025, each

operating for 25 years+, the O&M market is likely

to increase tenfold.

Deployment boom: think about supply logic Where does the money go ?

European market – 11GW in 2015 to 41GW by 2025

UK #1 global market to 2025 – total global wind farm investment over £100bn in the next 10 years

Offshore wind: the European opportunity

© BVG Associates 2016

CAPEX supply- multiple projects / OPEX supply- longevity Understanding where you fit within the supply chain is paramount


3% 57% 40%

£0.1bn £2.4bn £1.7bn

Source: EDPR (Moray) ~ £4.2bn 25 year spend (500MW mid size wind farm)

• Manufacturing, installation and

commissioning ~ high spend, concentrated

timeframe.

• Operations, maintenance and servicing ~

moderate annual spend, extended.

• As we move to

larger sites

further from

shore, new

offshore

subsea marine

challenges

exist….

Supply opportunities vary by area of lifecycle

0%

20%

40%

60%

80%

100%

TOTEX DEVEX CAPEX OPEX

% U

K c

on

ten

t


The deployment challenge – bigger, further, deeper…. 33 projects in Europe ~ Significant variation, but upward trends in water depth and turbine size


0

20

40

60

80

100

2002 2004 2006 2008 2010 2012 2014 2016 2018

Dis

tan

ce to

O&

M p

ort

(km

)

0

5

10

15

20

25

30

35

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Avera

ge w

ate

r d

ep

th (m

)

8

8.5

9

9.5

10

10.5

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Avera

ge w

ind

sp

eed

(m

/s)

0

1

2

3

4

5

6

7

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Tu

rbin

e rati

ng

(M

W)


How to diversify: Oil & Gas deep-dive

First analysis in a concerted effort by

‘Team Scotland’ to support our Scottish

O&G supply chain find diversification

opportunities in these challenging

times for the industry….

Offshore wind high potential diversification areas

Supply chain split into 35 sub-element areas of supply – 9 ‘hot spots’


Considers O&G track record in wind, supply synergies, appetite, cost-out potential, investment & size of the prize

1. Project

management

2. Array cables

3. Substation

structures

4. Turbine

foundations

5. Secondary

steelwork

6. Cable

installation

7. Installation

equipment

8. Installation

support

services

9. Operations,

maintenance

& inspection

services

Journey to ‘subsidy free’ – why it’s important

Our biggest challenge as an industry is LCOE reduction: do you bring cost innovative solutions ?

.

Cost of Energy Reduction = Offshore Wind Subsidy free by ‘23


The innovation cost reduction challenge

Moving to large turbines is the largest contributor, OMS to deliver 3-4% LCOE improvement

.


50% 60% 70% 80% 90% 100%

LCOE for a wind farm with FID in 2014

Increase in turbine rating

Improvements in components

Improvements in blade aerodynamics

Improvements in blade materials and manufacture

Improvements in blade pitch control

Introduction of multi-variable optimisation of array layouts

Improvements in monopile designs and design standards

Improvements in AC power take-off system design

Improvements in OMS strategy for far-from-shore wind farms

43 other innovations

LCOE for a wind farm with FID in 2030

OMS: challenges, potential innovative impacts

Solutions required for the next generation wind farms: CBM, automation and marine logistics

.


0% 2% 4% 6% 8% 10%

Improvements in OMS strategy for far-from-shore wind farms

Introduction of turbine condition-based maintenance

Introduction of remote and automated M&S

Improvements in personnel access

Introduction of wind farm wide control strategies

Improvements in personnel transfer from base to turbine location

Improvements in weather forecasting

Improvements in jacket condition monitoring

Improvements in inventory management

LCOE impact

Anticipated by 2030 Potential by 2030


OMS 2016 2025-30

Technology Scheduled

maintenance

Some condition-

based, but mostly

reactive service

Full health and usage

management

Fully condition-based

service with active

health management

Improved forecasting

Supply chain Turbine suppliers,

developers in-house

and 3rd-party service

providers

Contract ranges from

1-15 years (turbine)

In-house monitoring

and data control by

owners

Emergence of

integrated 3rd part

service suppliers

Portfolio approach

Major challenges and role of the supply chain

Logic for collaboration in OPEX phase: not competing as strike price already defined (15 years)

Operations, maintenance and service: the journey


Main per MW benefits

Decreased OPEX

Increased AEP

Market tasks: Operations, maintenance and servicing

High local potential: £2bn UK market by 2025


Market Abstract: Challenge ~ Uncertainty over the OMS strategies

adopted by developers as projects are built further

from shore.

Solution ~ Oil and gas suppliers have a vast amount

of experience in maintaining assets in the North Sea:

synergies in terms of defect detection, planned

maintenance and asset repair are extremely high.

Innovative approaches from the oil and gas sector will

be welcomed by offshore wind asset owners.

Operation, mantenance and service

41%

Fuel and consumable

s4%

Maintenance and

inspection services

33%

Spare parts5%

Vessels and equipment

36%

O&M ports

2%

Communication systems

1%

Inventory managemen

t0%

Other OPEX19%

Courtesy DNV-GL https://www.scottish-enterprise.com/knowledge-

hub/articles/guide/offshore-wind-operations-and-maintenance-opportunities

Based on the UK

Government’s projections for

the deployment of offshore

wind, the O&M of more than

5,500 offshore turbines could

be worth £2bn per annum by

2025 – an industry similar in

size to the UK passenger

aircraft service business

today.

Turbine

• Turbine OEM offers warranty (up to 5 years). Emergence of third

party OMS providers pushing this towards 15 years.

• Now: subcontract opportunities with turbine OEM.

• Future: more availability-linked contracts

: third party OMS contracting with asset owner

space for an EPC-type offering ‘one stop shop’ approach.

Substations & Offshore Assets ie met masts

• OMS subcontract opportunities with OFTO and/or developer.

Above the water Under the water

The O&M contracting dichotomy (very little out of warranty so no defined direction of travel)

O&M: understanding the customer and the opportunity


Foundations

• No real OEM warranties – contracting with the asset owner

Transmission ie array and export cables

• No real OEM warranties – contracting with the OFTO and/or

developer.

Key challenges – ‘hot’ issues

• A general push towards diverless solutions

• Innovate to reduce cost – new approaches considered

• Asset life extension is a key play

Many subsea assets now having to have retrofit corrosion

protection

• Over 50% of insurance warranty claims related to cables

Abstract: SOV versus CTV

• Industry at point of inflection – face of O&M will be defined by

which direction the industry takes.

• Siemens pushing SOV solutions – above 60Km from shore,

becomes cost competitive

• Use of offshore accommodation blocks and ‘daughter’ ships still

to be fully explored

Courtesy DNV-GL https://www.scottish-enterprise.com/knowledge-

hub/articles/guide/offshore-wind-operations-and-maintenance-opportunities

• Offshore wind is driven by turbine manufactures and utilities,

which have distinct cultures. The industry has matured without oil

and gas

• Perception of oil and gas companies being too expensive. Need to

prepared to bust that myth or cost reduce

• Offshore wind is not actively looking for oil and gas skills. Oil and

gas companies need to be proactive and show how they can

make a difference

• Offshore wind doesn’t have a long-term vision of the O&M supply

chain. Oil and gas companies need to be able to articulate a

strategy based on what it can bring to offshore wind

• Lack of track record and presence of long term service

agreements mean that oil and gas entry will need to be

evolutionary. Oil and gas companies should aim to build up

experience by providing individual services before building up a

portfolio that enables a more integrated service to be offered

Challenges for Oil & Gas companies to navigate Where to target the O&M market

The O&M contracting dichotomy (very little out of warranty so no defined direction of travel)

O&M: challenges and addressing perceived challenges


(i) Reduce cost through the introduction of innovative repair

techniques

(ii) Increase access windows

Subsea

inspection

(active and

passive)

Remote

cable

monitoring

/ inspection

Drone

inspections

Condition

based

monitoring

Cable

scour

inspection

Cable joint

repair

Automated

inspection

Decision

making

tools

Turbine

access

Satellite

applications

Vessels &

manpower

– marine

logistic

optimisation

Key to successful diversification -

ensure there is capability overlap

between “legacy” and “new “

offshore wind next generation

requirements….

Things to consider

Final thoughts


• Diversification can be a great business strategy - a

targeted move into a new sector can spread risk,

generate new revenue and reduce unit costs.

• Two-way learning - processes and innovative thinking

developed over decades in oil and gas can be transferred

to offshore wind ~ rapid cost reduction, standardisation

and faster deployment techniques in offshore wind can

benefit oil and gas.

• O&M is a key area for considering where each part of the

supply chain is: Adopt, Adapt, Develop & Collaborate….

Adopt - many practices from oil and gas can be adopted

for the betterment of offshore wind as is.

Adapt - what core capabilities in O&G can be modified for

use within offshore wind ?

Develop - many longer term solutions in offshore wind

not yet clear: O&G thinking can help shape.

Collaborate - logical sense for operators, developers,

suppliers and academia to work together to bring about

positive change particularly within the O&M space.

Marriage made in heaven or a marriage of convenience ?

Too early to say, but if you don’t get your best clobber on

and brush up on your chat up lines, yer no even getting a

first winch….

BVG Associates Ltd

The Blackthorn Centre

Purton Road

Cricklade, Swindon

SN6 6HY UK

tel +44(0)1793 752 308

[email protected]

@bvgassociates

www.bvgassociates.co.uk

BVG Associates Ltd

The Boathouse

Silversands

Aberdour, Fife

KY3 0TZ UK

tel +44(0)1383 870 014

This presentation and its content is copyright of BVG Associates Limited - © BVG Associates 2016. All rights are reserved.

Please get in touch, I am more than

happy to chat through how your

company can position itself for success

across the renewables spectrum….

[email protected]

oil and gas diversification: high potential areas, key challenges (operations ... · 2016-10-10 ·...

Documents