Prospects of a carbon-free future is threatening oil and gas companies with declining business growth in Europe unless they successfully transfer their technology and skills into renewable energy and discover new business opportunities, says a new report from analysts Frost & Sullivan.
This new analysis finds that the European renewable energy industry — offshore wind, geothermal, solar, marine and biofuels — boomed in 2008 with share of renewable energy in the European energy mix increasing from 14.6 per cent in 2006 to 16.3 per cent in 2008 despite the economic downturn.
"While consumption of electricity from conventional energy sources has declined, consumption of electricity from renewable energy sources continues growing," says Zeinegul Hassan, Frost & Sullivan Research Analyst Energy & Power Systems Group. Since Europe is dependant on oil and gas imports, the increase of renewable energy share in the energy mix is of great importance to the region.
One of the most attractive renewable energy areas for O&G companies is offshore wind. The offshore wind market, fast growing and backed by government support, must nevertheless overcome bottlenecks in the supply of components and a lack of purpose-built installations. The O&G industry can help offshore wind through experience and technology transfer and sharing equipment and labour force.
Another renewable energy sector that oil and gas companies could help to grow is the geothermal energy market, says F&S. Although mature, the geothermal market requires investments to achieve economies of scale and reduce costs. Here, oil and gas companies can offer their drilling expertise and services: their involvement as technology developers is likely to help the market transfer to Enhanced Geothermal System (EGS) technology.
Restraints on investment
Solar energy also has great potential, says the report — but still needs to be subsidised in order to develop further. Here, the high cost of equipment and the dependency on government support is a restraint to investors, although the oil and gas industry can offer engineering and r&d expertise to help lower equipment costs.
The marine energy market can adapt some of the offshore oil and gas technologies. Marine energy is a non-intermittent and highly efficient renewable energy source, but without clearer government support and expanded technical expertise, it is the least attractive for investors, says F&S. However, the subsea oil and gas industry can transfer skills and technologies to facilitate market growth.
In the EU, the biofuels market has negative profit margins and faces strong competition from cheap imports, says the report. However, the market should grow thanks to the EU ten per cent biofuels commitment. This sector is one of the first to get an interest from oil and gas companies.If second generation biofuels are successful, more oil and gas firms are expected to invest in biofuels.
