OSLO/LONDON (Reuters) – BP entered the offshore wind market on Thursday with a $1.1 billion deal to buy 50% stakes in two U.S. developments from Norway’s Equinor, a significant step by the oil firm towards its energy transition goals.
The British oil and gas company has set itself a target of increasing its renewable power generation capacity 20 fold over the coming decade to 50 gigawatts (GW).
As part of the deal, BP and Equinor also agreed to form a partnership to develop other offshore wind projects in the United States, Dev Sanyal, BP’s head of gas and low carbon energy, told Reuters.
European oil firms are under pressure from activists, banks, investors and some governments to shift away from fossil fuels and analysts say offshore wind farms are probably the quickest way for them to scale up.
The deal includes the Empire Wind project off New York and Beacon Wind off Massachusetts, which could together generate up to 4.4 GW – enough power for more than two million homes.
The Empire project is expected to start operations in the mid-2020s, Equinor’s renewables chief Pal Eitrheim told Reuters.
Equinor will be the operator of the two projects and BP staff will join the development and construction phases as part of the two companies’ partnership to develop both bottom-fixed and floating offshore wind facilities, he added.
Equinor expects to book capital gains of roughly $1 billion from the transaction, an executive at the state-controlled firm told Reuters.
“It confirms that our strategy to get early access to the U.S. coast was right and it created the value,” Equinor’s head of renewable energy Paal Eitrheim said.
The $1.1 billion deal, which does not include development spending, is expected to close in early 2021.
BP already has a large onshore wind business in the United States with a capacity of around 1.7 GW, but has refrained in the past from entering the offshore wind market.
The deal challenges any assumption that renewable projects can’t offer returns on the scale offered by oil and gas, and is likely to increase the market’s confidence in Equinor’s offshore wind business, Sparebank 1 Markets analyst Teodor Sveen-Nilsen said.
Empire Wind phase 1 secured an offtake agreement last year and will have between 60 and 80 turbines.
(Reporting by Gwladys Fouche and Nerijus Adomaitis in Oslo and Ron Bousso in London; Writing by Terje Solsvik; Editing by Jacqueline Wong, Jan Harvey, Alexander Smith and David Clarke)