Happy belated Mother’s Day to the incredible moms in our industry! My wife and I got to celebrate this special day in Dallas at the invitation of our eldest daughter, so this edition of Well Read comes to you from my temporary desk in the DFW Metroplex.
Shangyou Nie
Editor, Well Read
The Economic Realities of U.S. Offshore Wind
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Experts at the Offshore Technology Conference in Houston last week said the Biden administration’s target of producing 30 gigawatts of offshore wind power by 2030 will be hard to reach due to economic headwinds (pun intended). Will the infant industry ever grow to reach its potential?
What they are saying:“2023 was a tough year for offshore wind in the U.S.”—Troy Patton, Offshore COO for North America at Denmark-based Orsted in his keynote.
Context: Many have hoped offshore wind along the East Coast would be a significant contributor to the American energy transition due to three factors:
Long, shallow coastline that's good for building fixed foundations where companies can install large wind turbines
Many projects’ proximity to population and economic centers with potential customers
Availability of ports and their supporting industries
What followed:
In 2021, the Biden Administration set an ambitious target to deploy 30 gigawatts of offshore wind power by 2030, which would power 10 million homes.
A year later, the Inflation Reduction Act provided tax credits to cover 30 percent of project costs for offshore wind.
Leading European offshore wind companies saw a major potential growth opportunity emerging in the U.S. market.
Orsted, BP, Shell, Equinor, EdF, and Siemens invested billions into offshore wind projects along the U.S.’ East Coast.
Economic reality hits:
Since these investments, the U.S. has been hit by high inflation rates impacting materials, supply, and labor.
Higher interest rates significantly reduced profitability potential for these projects, many dependent on project financing.
Abundant and relatively cheap U.S. gas has made it more difficult for offshore wind power to compete against gas-fired power.
Wind power takeaways from OTC:
A number of projects were cancelled in 2023, due to the difficult economic elements. More have failed this year.
In 2023, Orsted and BP both wrote off the billions from investments in wind projects on the U.S.’ East Coast.
Only 7.3 gigawatts from six projects have firm offtake agreements in place out of 13. 7 GW for 11 projects planned or in construction along the east coast.
Efforts along the Gulf Coast and West Coast will take longer to materialize. Only one of three offshore wind auction areas in the Gulf Coast received bids in 2023.
More wind power challenges in the news:
According to the Wall Street Journal, offshore wind project costs rose 60 percent from 2021 to 2024.
But there is some optimism: Despite setbacks, some projects continue to progress, such as Orsted’s Revolution Wind near offshore Rhode Island, which is scheduled to be completed by 2025.
What to watch:
Will many offshore wind developers re-negotiate their contracts with regulators and customers or face cancellations in the near future?
How long before other initiatives, such as floating offshore wind and green hydrogen from offshore wind, become reality?
Three Texas Cities Pay the Highest Salaries in U.S. Upstream Energy
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Houston, Midland, and Dallas-Fort Worth pay the highest salaries to upstream oil and gas personnel in 2023, according to a salary survey released by Fort Worth-based recruiting firm CSI.
Method: The data was gathered via a voluntary survey from 1,800 technical full-time professionals at operating companies, service companies, and investment firms.
Top earners: Drilling engineers are the highest-paid upstream professionals, followed by reservoir engineers, geologists, production/operations engineers, then landmen.
By the numbers: The average salaries for the top-paid positions were:
Drilling engineers: $170,910
Reservoir engineers: $169,050
Geologists: $165,410
Production engineers: $158,010
Landmen: $150,080
Bonuses: The average annual bonus was between 21-28 percent.
PTO: Paid time off ranged from 3.3 to 3.9 weeks.
Experience: On average drilling engineers surveyed had 17 years of professional experience, followed by 14 years for both production/operation engineers and geologists, 13 years for reservoir engineers, and 12 years for landmen.
Specialty by location: Houston ranked number one for drilling engineers and geologists; while Midland topped the list for reservoir engineers, production engineers, and landmen.
One big thing: The industry’s labor force is shrinking, but production is growing.
According to CSI, the upstream industry employed 30 percent fewer workers in 2023 than in 2015.
BUT U.S. crude production was 12.9 million b/d in 2023, 37 percent higher than in 2015 (9.4 million b/d).
Would progress in automation and AI be able to compensate for the significant loss of work force in coming years to maintain production growth?
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