In focus: Investments in oil, offshore wind hit a snag, while deals on new green vessels keep emerging

Even though it is an industry which is seeing major growth, European offshore wind saw no investments in an offshore wind farm in 2022 (except in a few small floating wind projects). Oil companies are also tip-toeing around new capital investments. Meanwhile, in the shipping sector, deals on new, greener vessels continue emerging.

According to a new analysis from Westwood Global Energy, capital investment from oil majors is lagging, even though they generated record cash from oil and gas production, enabling major payouts to shareholders.

This is mostly because companies are promising to focus on value over volume through 2030, with an emphasis on low cost, lower emissions production with strong cash generation and generous shareholder distributions while capital discipline is promised with upstream projects to downside price scenarios.

One of the reasons is also a bigger focus on returns rather than growth, following the oil price crash in late 2014, which exposed the earlier overspending in the dash for growth in the 2010-14 period and massive capital impairments and headline losses followed.

Big oil is not the only group that is keeping an eye on its wallet in these turbulent times.

While CapEx in offshore wind is forecast to hit record highs over the next several years, 2022 was not the lead example, at least looking at the sector in Europe, where not a single investment in an offshore wind farm was made last year, apart from a few small floating wind projects, according to WindEurope.

Several offshore wind farms were expected to reach financial close last year, but final investment decisions were delayed due to inflation, market interventions, and uncertainty about future revenues. Overall, the EU saw only 9 GW worth of new turbine orders in 2022, a 47 per cent drop compared to 2021.

Inflation in commodity prices and other input costs has raised the price of wind turbines by up to 40 per cent over the last two years. However, the prospective revenues of those planning to build wind farms have not kept pace with this, WindEurope said.

One of the sectors that seem to be more determined to spend money on new projects this (and last) year, is shipping – and a lot of the new investments there are going into vessels powered by clean fuels and/or featuring other aspects that help decarbonise the industry.

Among the latest deals made is that by South Korean shipping company HMM, which just signed newbuilding contracts with Hyundai Samho Heavy Industries (HSHI) and HJ Shipbuilding and Construction (HJSC) for nine 9,000 TEU containerships powered by methanol dual-fuel engines.

HSHI and HJSC will build seven and two vessels, respectively, costing a total of $1.12 billion. The ships are scheduled to be deployed on the Asia-North/Latin America trade lanes and the Asia-India routes, with expected delivery from 2025 to 2026.

The company confirmed to Offshore Energy – Green Marine that it was looking into ordering methanol-powered vessels in December 2022. The move is being pursued as part of the shipping major’s future growth strategy, which has earmarked $11.3 billion for future investments. These include the expansion of eco-friendly ships from the current 820,000 TEU to 1.2 million TEU by 2026.

Around the same time, MAN Energy Solutions (MAN ES) announced that, through its licensee Mitsui E&S Machinery, it had signed a contract with Chinese shipbuilder Tsuneishi Shipbuilding to provide a methanol-powered engine for a 65,700 dwt bulk carrier.

Under the agreement, the company will provide its MAN B&W 6G50ME-LGIM engine. The vessel represents the latest methanol-fuelled engine ordered by the bulk-carrier segment in recent weeks.

MAN ES revealed back in 2021 that it was working on upgrading its four-stroke engines to run on green future fuels, including methanol and ammonia.

The new engines are expected to reduce harmful emissions and meet future, stricter environmental requirements and regulations, according to the company.