BP has launched an attempt to become a significant force in the UK’s offshore wind industry as the oil price rose above $60 per barrel for the first time in a year amid recovery hopes.
The oil giant was appointed preferred bidder for licences covering two large areas of the seabed in the first offshore wind leasing round of its kind in a decade.
This attracted strong interest from oil and gas firms as industry players look to reinvent themselves in support of claims they can play an important part in efforts to tackle climate change.
READ MORE: Oil giant says North Sea remains core area as it plunges into red
BP chief executive Bernard Looney said success in the round marked BP’s entry into one of the world’s best offshore wind markets and represented important progress towards its transformation into an integrated energy company.
BP formed a joint venture with Germany’s Energie Baden-Wuerttemberg (EnBW) to bid for the leases.
The terms agreed by the firms underline their belief in the potential of the territory covered by the leases. The acreage lies between the Isle of Man and Liverpool. The venture partners have agreed to pay the Crown Estate around £1.8 billion fees over the first four years in total. They could invest significantly more if they decide to proceed with the investment required to develop windfarms on the leases.
“We are fully confident that these highly advantaged resources will deliver - at a minimum – the eight-10 per cent returns we demand of our renewables investments,” said Mr Looney.
BP and Shell have said they will use the profits they make from oil and gas production to allow them to invest heavily in renewables while making payouts to investors.
Brent crude traded up $1.03 per barrel at $60.37/bbl yesterday afternoon. It last traded above $60/bbl in January 2020.
The price fell from around $70/bbl in that month to less than $20/bbl in April. It has rallied amid hopes that coronavirus vaccines will power a global recovery and moves by major exporters to cut output to support the market.
The Crown Estate manages the seabed off England, Wales and Northern Ireland. The body says 100 per cent of its profits are paid to the Treasury for the benefit of the nation.
In June last year Crown Estate Scotland launched the first offshore wind leasing round to cover acreage off the country for a decade.
Management of the Crown Estate in Scotland was devolved to the Scottish Government in 2017.
Last summer Total acquired a 51% stake in the project to build the giant Seagreen windfarm off the Angus Coast, which will involve around £3 billion of investment.
The BP-EnBW joint venture expects to make four annual payments of £231million on each lease before projects reach final investment decision. Projects are expected to be operational in seven years.
Projects proposed by bidders will be subject to environmental assessment.
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