(Bloomberg) – BP, the oil giant that announced a seismic strategy shift last month, made its first venture into offshore wind power with a $1.1 billion purchase of U.S. assets from Norway’s Equinor ASA.
The deal marks the start of an offshore-wind investment partnership in the region for the two companies, which have been at the forefront of the rapid changes in the oil industry as companies seek to adapt to the realities of climate change.
BP has taken the boldest steps so far in abandoning the oil-supermajor business model. Just six months after taking the helm, CEO Bernard Looney said in August he’d shrink oil and gas output by 40% over the next decade and spend as much as $5 billion a year building one of the world’s largest renewable-power businesses.
BP will receive a 50% stake in the Empire Wind and Beacon Wind developments off New York and Massachusetts, respectively, the companies said in two separate statements on Thursday. Equinor will retain 50% in both, and continue to be the operator.
Empire Wind, whose first phase could start in 2024-25, has a potential installed capacity of more than 2 gigawatts, and Beacon Wind more than 2.4 gigawatts. Together they’ll be able to power more than 2 million homes. Equinor earlier estimated total investments in Empire Wind’s first phase at about $3 billion.
The companies plan to participate in more offshore wind projects in the U.S., bringing together their significant balance sheets and experience of handling large projects.
“Our ambition would be to replicate this across the U.S.,” Dev Sanyal, executive vice president for gas and low-carbon energy at BP, said in an interview. “States are going through their own process of looking at the offshore wind sector, and as offshore leases come available both of us would like to be a part of that.”
Norway’s state-controlled Equinor has so far been the most aggressive oil major in offshore wind, seeking to capitalize on its experience in operating big industrial projects at sea. It’s now reaping the rewards of its early-mover status, expecting to book a $1 billion gain from the BP transaction.
The company’s shares rose 0.6% in Oslo trading as of 1:37 p.m. local time, while BP declined 0.3% in London.
Equinor last year sold half its stake in a wind farm off Germany, recouping its initial investment. Bloomberg has also reported that the company is in talks to reduce its stake in what will be the world’s biggest offshore wind farm in the UK
Equinor beefed up its climate strategy earlier this year, and incoming CEO Anders Opedal has vowed to increase the pace of the transition when he starts in November.
BP’s boss Looney has set a target to boost renewable-power capacity to around 50 gigawatts by 2030 from 2.5 gigawatts last year. It won’t explore for oil in any new countries — a major step away from the traditional business that made the company an energy supermajor for decades.
BP and Equinor are looking to leverage each other’s strengths in the clean-energy sector in this and any future partnership. While the British company is already a big player in solar and onshore wind, its Norwegian counterpart has major offshore wind projects. Both have energy trading units that can squeeze out profits from the market.
“We are complementary in many ways,” Equinor’s Executive Vice President for New Energy Solutions Pal Eitrheim said in an interview. “I see this as the hand and the glove coming together in an attractive growth market.”