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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Big Oil Gearing Up For Massive Gulf Of Mexico Offshore Wind Auction

  • According to the Maritime Professional, there are over 45 offshore wind projects in development in the United States.
  • The U.S. government is considering opening 30 million acres of the Gulf of Mexico near Texas and Louisiana to offshore wind energy projects.
  • NREL: the U.S. will need more than 2,100 wind turbines, at least 2,100 foundations, more than 11,000 kilometers of cables and five wind turbine installation vessels.
Offshore wind farm

Last year, the Biden administration outlined a range of clean energy initiatives it plans to undertake, key among them being the largest-ever sale of offshore wind leases in U.S. history. Well, the time has finally arrived with Big Oil companies and other offshore wind energy developers now getting ready for the first ever offshore wind auction by the U.S. government in the Gulf of Mexico to be held on August 29. The Final Sale Notice for the auction included a 102,480-acre area offshore Lake Charles, Louisiana, as well as two areas offshore Galveston, Texas, one comprising 102,480 acres and the other 96,786 acres. The debut projects will have a seabed for a potential 3.7GW, with lease prices expected to go as high as $4,000 per acre if Big Oil decides to give pure-play offshore wind developers a run for their money.

The Gulf of Mexico is poised to play a key role in our nation’s transition to a clean energy future. Today’s announcement follows years of engagement with government agencies, states, ocean users, and stakeholders in the Gulf of Mexico region. We look forward to continued collaboration in the years to come,’’ said?Elizabeth Klein, director of U.S. regulator the Bureau of Ocean Energy Management.

The U.S. government is considering opening 30 million acres of the Gulf of Mexico near Texas and Louisiana to offshore wind energy projects as part of Biden’s goal to build 30 gigawatts of wind power capacity by 2030, enough to power more than 10 million homes. According to a report by the National Renewable Energy Laboratory (NREL), the U.S. will need more than 2,100 wind turbines, at least 2,100 foundations, more than 11,000 kilometers of cables and five wind turbine installation vessels to achieve its offshore wind energy target. Currently, the country has ~72K existing wind turbines listed in continental U.S. The Gulf of Mexico, however, has a much bigger potential, with the region estimated to hold some 500GW of commercial offshore wind potential. Related: OPEC+ Not Expected To Alter Oil Production Policy Amid Price Rally

Perfect Fit

Though the Gulf’s waters haven’t sprouted any wind turbines yet, there are several reasons why the Gulf of Mexico is a perfect fit as an offshore wind hub.

First off, the Gulf Coast also has an abundance of companies and workers with decades of experience in producing energy offshore. According to the Energy Information Administration, Gulf of Mexico federal offshore oil production accounts for 15% of total U.S. crude oil production. Major fields include Eugene Island block 330 oil field, Atlantis Oil Field, and the Tiber oilfield (discovered 2009) while notable oil platforms include Baldpate, Bullwinkle, Mad Dog, Magnolia, Mars, Petronius, and Thunder Horse. 

“We have a really mature base for energy. We’ve got the know-how,” Lefton said. The people, the companies, the manufacturers that know how to do [Outer Continental Shelf] energy development are in the Gulf of Mexico,” the Interior Department’s Bureau of Ocean Energy Management director Amanda Lefton has told Politico.

According to Hayes Framme, government relations manager for North America at Danish wind giant Ørsted A/S (OTCPK:DNNGY), the Gulf’s existing oil and gas infrastructure represents “a historic expertise.”

One of the things that makes the Gulf area attractive is the fact that you’ve got a workforce that is accustomed to working on rigs in the ocean. It’s not like you have to build an industry. What you have to do here is basically help an existing industry evolve,’’ Dennis Arriola, CEO of the renewable energy company Avangrid Inc. (NYSE:AGR), has said.

Michael Hecht, the president and CEO of Greater New Orleans, says jobs in the Gulf’s traditional oil and gas industry have declined during the past decade, creating a sense of urgency to make a transition that allows people to retain their skills.

The Gulf could also become an important hydrogen hub, with wind power being used to generate green hydrogen to reduce greenhouse gas emissions from industries such as long-haul trucking, fertilizer manufacturing and aviation.

Offshore Spending Soars

According to the Maritime Professional, there are over 45 offshore wind projects in development in the United States, representing $136 billion in capital expenditure and $4.4 billion annual OPEX opportunity. Maritime estimates that 46 offshore wind projects will install 43 GW of capacity in this and the next decade, with the projects forecast to be brought on-stream within this and early in the next decade.

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The publication says that 17.5 GW of project capacity has already secured offtake commitments, while 16.5 GW of new federal offshore leasing activity in the northeast, South Atlantic and California is underway. 

The U.S. Department of Energy has reported that the U.S. offshore wind pipeline grew 24% Y/Y in 2022, with 35,324 MW now in various stages of development thanks to falling offshore wind prices, federal action, and state-level commitments. 

By Alex Kimani for Oilprice.com


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