The Keys to Managing Offshore Energy Risk & Uncertainty

Decarbonization Driving Change

Central to the great changes taking place is the question of decarbonization. The offshore industry contributes significantly to global oil and gas industry emissions, and the need to reduce these emissions and enhance operational efficiency has driven the exploration of new ways to decarbonize.

From electrification of offshore platforms to the adoption of renewable energy solutions, the industry is embracing innovation to achieve its sustainability and performance objectives.

This is being enhanced by digitalization. A digital revolution is taking place as novel technologies and data-driven solutions enable new ways of working, enhancing safety, reliability, and efficiency, while also driving cost savings.

The Evolving Energy Picture

At the same time, a wider and more fundamental shift is taking place. Oil remains central to the global energy mix, and it is estimated that there will be a substantial deficit of oil coming into the 2030s , unless new developments materialize. Gas is widely regarded as a bridging fuel for the energy transition, and global demand has never been higher, prompting increased investment in offshore assets such as FPSOs.

That we are witnessing a shift towards renewable energy sources is clear, however.

Offshore wind production continues to rise. For example, DNV’s ‘North Sea Forecast: Ocean’s Future to 2050’ report, highlights the rapid growth of offshore wind in the North Sea, projected to claim 9% of the North Sea space by 2050, compared to under 2% this year.

Other areas like fish farming and mineral mining are also increasingly prominent, further indicating the evolving and diversifying ocean space.

Geopolitical Tensions Creating More Uncertainty

In the face of this uncertainty, the offshore industry needs to adapt. This demands innovation, collaboration, and forward thinking with this, ideally, supported by a progressive and stable regulatory environment.

However, today’s geopolitical tensions are often having the opposite effect, sending mixed signals to investors and key decision makers, and causing confusion.

The recent actions of the current US administration are one example of this. The Inflation Reduction Act (IRA) created significant opportunity for tax reduction and government grants towards renewable projects. However, the current administration’s new focus towards oil and gas, has led to decreased investment and interest in the renewable space.

The practical effects of this are already being felt, with key developments, like the Empire Wind 1 project off the coast of Long Island recently halting construction.

Moves like this have understandably had an impact throughout the value chain.

The Complex Energy Trilemma

Amid all this uncertainty, stakeholders across the offshore industry are understandably searching for ways to create more stability. Leaving the added instability of political developments aside, most companies in the space are wrestling with the challenge of the ‘energy trilemma’ – the simultaneous but sometimes contradictory achievement of environmental sustainability, energy security, and affordability.

This is no easy task as offshore companies strive to optimize resources, remain profitable, and continuously maintain energy supply in the face of market and geopolitical challenges, while also making moves to reduce emissions and reach decarbonization goals.

Maintaining Asset Integrity

Extending the operational life of assets, while maintaining asset integrity is one way to balance these demands. Many offshore units have surpassed the 15-year mark on locations that still have years to go on production, prompting operators to find the best ways to prolong their lifespan in a safe and sustainable manner.

Doing this correctly will enable operators to avoid replacing these assets, helping them to reap significant cost savings. However, it is crucial that this is done in a way that integrates modern, digitalized systems, meeting decarbonization demands, while maintaining safety and reliability.

Finding a Sustainable Way Forward

Reaching the desired balance of the ‘energy trilemma’ can also be achieved by adopting a strategic approach over the entire lifecycle of an offshore asset. This means applying rigorous standards and best practices from the bottom up, starting with design and construction, and maintaining these through to operation and decommissioning. Doing this will ensure that assets and operations are safe, reliable, and compliant with modern standards, meeting the expectations of the entire offshore industry, and its stakeholders.

Further, balancing the continued need for oil and gas with renewable energy sources requires strategic investments and collaboration across various sectors. Embracing green technologies is critical to achieving carbon reduction goals and ensuring a cleaner, sustainable future. However, this must be integrated with energy security, while also ensuring that economic growth aligns with social equity, and a respect for the ocean space.

Growing with the Ocean Space

The ocean space is in constant flux and demands on stakeholders have never been higher.

While this may seem overwhelming to some, companies should embrace the change and learn to chart their own evolutionary pathway.

This requires familiarity with new technologies, careful planning, and collaboration throughout the supply chain, and with key external stakeholders. Crucially, the highest safety standards should always be maintained along the way.

This is a complex balancing act, and there are many obstacles to overcome. Nonetheless, the opportunities are enormous. As we approach the middle of the 21^st century, companies which embrace the challenge, innovate, and evolve with the fast-moving ocean space will reap the benefits for years to come.