BP has struck a deal with Japanese energy company JERA to combine their respective offshore wind assets in a joint venture that could become the world’s largest offshore wind operator.
The new firm, JERA Nex bp, will combine both companies’ portfolios, including projects still in development, and have a projected net generating capacity of 13 GW.
The venture comes amid a strategy reset for bp, which has recently slowed down its offshore wind business to focus on oil and gas output.
Murray Auchincloss, who was appointed bp CEO in January, said: “This will be a very strong vehicle to grow into an electrifying world, while maintaining a capital-light model for our shareholders. We very much look forward to combining our strengths in Europe and Asia-Pacific to create another innovative platform.”
New company
bp says the joint venture will initially focus on progressing existing projects in northwest Europe, Australia, and Japan, including two Australian windfarms, the Blue Mackerel and Spinifex projects planned for the coast of Victoria, with a combined capacity of 1.4 GW.
JERA’s already operates 1 GW worth of wind farms in Belgium, Japan, and Taiwan, while bp has no windfarms currently in operation. Around 12 GW of energy for the deal is expected to be generated through projects still in development.
bp’s offshore divestment
Like competing energy companies Shell and Equinor, bp has cooled its ambitious net zero goals.
In its 2020 strategy, the company said it intended to cut oil and gas . This has since been reduced to 25%.
Offshore wind has also proven to be an investment risk, as supply chain challenges and pricey equipment has increased the development costs for projects.
Global consulting company McKinsey & Company found that progress for offshore declined slightly last year as project costs and revenue loss increased by 7%.
The sector is highly competitive, with projects racing to get approval by developing bigger turbines and structures. According to intelligence firm Energy Intelligence, this constant need for larger equipment and materials has prevented the market from properly maturing and has made cost reductions difficult due to the lack of standardisation.
To bolster investor confidence, bp has put a pause on developing offshore wind and other renewable projects which are not expected to generate returns in the short term, reports Reuters.
For the joint venture, both bp and JERA will provide capital funding of up to £4.5bn (US$5.7bn) to attract competitive financing before the end of 2030. However, the new company will look to raise funding itself and rely less on the support of bp’s shareholders.
The deal for JERA Nex bp is expected to be completed by Q3 next year.
