Published on 16 March 2023
IMCA’s campaign for fairer contracting principles continues with CEO Allen Leatt recently interviewed in leading industry publication, Energy Voice recently.
Speaking to editor Allister Thomas, Leatt reiterated the main point that the supply-side of offshore wind is currently unprofitable, putting at risk global ambitions for the sector.
He said: “The allocation of risk is one-sided from developers and their bankers to the supply chain, which is not the case in the oil and gas industry which understands the dynamics of offshore construction and marine environment. As a consequence of this risk allocation, the supply side is largely loss-making, with an impact on the economics of projects and asset allocation.
“If you’re a contractor today, and oil and gas is doing well today, then where would you want to see your assets, your resources and energy? Therefore, you may well see assets moving, which might otherwise been in wind, in oil and gas.”
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Published around the same time, two IMCA members were featured in a Financial Times article exploring the sustainability of offshore wind with Vattenfall and Orsted both warning the UK government that cost increases of between 20% and 30% are impacting on their ability to meet previously agreed contracts.
IMCA’s solution: Better contracts and an industry competitiveness programme
IMCA is calling for more cross industry collaboration and the development of an Offshore Wind Competitiveness Programme.
Modelled on the development of CRINE: Cost Reduction Initiative for the New Era – which saw operators and contractors collaborating to take out unnecessary costs in the oil and gas supply chain – this eventually led to the formation of LOGIC, a Leading Oil & Gas Industry Competitiveness programme.
A Leading Offshore Wind Industry Competitiveness programme, LOWIC, could do the same but for offshore wind. IMCA is engaging with industry stakeholders, members and others to gauge appetites for the development of a similar approach.
To support the eventual development of new offshore contracts with a fairer allocation of risk, IMCA has developed a series of contracting principles to start conversations in this space and help the entire industry move towards a more sustainable contracting environment for offshore wind.
Without a change in contracting strategy, the huge ambitions and expectations for offshore wind from government, investors and developers are at risk of not being met.