Companies of all sizes are being attracted to the opportunities offered by the offshore wind sector. The industry’s potential scale, breadth and financial value make it an attractive proposition for global engineering, construction and project management giant, Bechtel, a US-headquartered global corporation with a 114-year history, more than 50,000 employees, and 2011 revenue in excess of $30bn.
Last month, Bechtel announced a non-binding agreement with leading marine engineering firm, Subsea 7. The two companies are preparing to bid for several contracts and aim to close two or three major offshore wind contracts over the next five years.
Offering high-quality EPC
Construction of an offshore wind project relies on a variety of players performing well and on time. Having dabbled with the sector in a traditional multi-contracting scenario a couple of years ago, Bechtel has decided that a more integrated approach is the best way forward.
In Bechtel’s view, splitting project risks between the “dry” and “wet” parts of a contract – by seeking to segregate the onshore elements more familiar to established wind energy contractors from offshore elements that are the realm of marine specialists – is problematic. “We determined that, even if you split the risk, you’re still taking up as much risk as overall contract manager,” explained Jim Ivany, president of renewable power at Bechtel, to Windpower Offshore. “So we looked to combine the two and have direct control.”
Despite taking an integrated approach, Bechtel acknowledges that it would be unwise to move into the offshore wind space on its own. “We felt we didn’t have adequate, direct marine construction experience,” says Ivany. Hence the search for a company that could complement Bechtel’s skills, but also “stand shoulder to shoulder” in terms of values, integrity and reputation. Ivany says it did not take long for Bechtel to decide that Subsea 7 was the best fit.
Specialist offshore engineering group, Subsea 7, is a global business, listed on the Oslo stock exchange and headquartered in London. Bechtel’s vision of partnering with a strong contractor capable of taking on a range of risks and carrying out all types of offshore work resonates with Subsea 7. “We think that in the future, to bring costs down, it will be necessary to have a more integrated approach,” says Jan Willem der Graaf, senior vice-president for renewable energy at Subsea 7.
As many voices within the offshore wind industry have remarked, supply chain integration will be of critical importance if costs are to come down. The use of expensive vessels and materials means that any delay quickly ramps up costs, says Ivany. “Our global procurement organisation is very strong and very experienced. This makes a huge difference when it gets to the field,” adds Ivany.
Meanwhile, Subsea 7 sees its emphasis on quality as a crucial contribution. “You need to have good kit. If you go sub-standard, there will always be a price to pay in terms of efficiency,” says van der Graaf. That said, he accepts that the race to drive prices down is firmly on.
In a field that already features established players, Bechtel believes it can win valuable contracts through its combination of global experience, specialist staff and sheer corporate bulk. Ivany identifies large utilities with their own engineering, procurement and construction (EPC) businesses as his biggest hurdle, but he is optimistic about future opportunities. “Some of them have already talked to us about changing their model,” he told Windpower Offshore.
Collaboration between Bechtel/Subsea 7 is currently focused on near-term opportunities in the UK and Germany, although the two companies will also be ready for the US East Coast “when it happens”. “It would be a mistake to target too many markets and dilute what we bring,” says Ivany.