This is Alan Duncan's presentation delivered at All-Energy 2017 outlining the importance of the supply chain in offshore wind industry and the role for oil and gas companies

1. Offshore wind 2: The
importance of the supply
chain
The offshore wind opportunity for oil
and gas companies
10 May 2017
© BVG Associates 2017

2. Supporting the renewables sector for 10 years
Strategic focus
BVG Associates is a renewable energy consultancy
focusing on wind, wave and tidal, and energy systems.
Company
© BVG Associates 2017
Business
• Analysis and forecasting
• Strategic advice
• Business and supply chain development
Economics
• Economic impact and local benefits
• Technology and project economic
modelling
• Policy and local content assessment
Technology
• Engineering services
• Due diligence
• Strategy and R&D support
BVG Associates

3. Overview of Offshore Wind
Quick reminder: Demand - Global & UK deployment boom
© BVG Associates 2017
0
30
60
90
0
3
6
9
'05 '07 '09 '11 '13 '15 '17 '19 '21 '23 '25
Cumulativeinstalledcapacity
(GW)
Installedcapacity(GW)
Asia Europe North America Rest of world Cumulative
Source: BVG Associates
0
5
10
15
20
0.0
0.5
1.0
1.5
2.0
'16 '17 '18 '19 '20 '21 '22 '23 '24 '25
Cumulativeinstalledcapacity
(GW)
Installedcapacity(GW)
Year of turbine installation
UK annual Cumulative
Source: BVG Associates

4. © BVG Associates 2017
0
50
100
150
200
'15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30
Costofenergy€/MWh)
Date of first operation
Offshore wind (Q1 2017) Offshore wind (Q3 2015) CCGT (BEIS Nov 2016)
NNG (UK) - Mainstream EA1 (UK) - Iberdrola Horns Rev 3 (DK) - Vattenfall
Borssele1&2 (NL) - DONG Vesterhav (DK) - Vattenfall Kriegers Flak (DK) - Vattenfall
Borssele3&4 (NL) - Shell consortium
Could CfD2 ‘strike’ below
Hinkley C £92.50?
Overview of Offshore Wind
Quick reminder: Economic argument - LCOE trajectory

5. © BVG Associates 2017
LCOE and supply chain impact
Margin erosion expected but main contribution is bigger turbines
0
2
4
6
8
0
50
100
150
200
2000 2005 2010 2015
Turbinerating(MW)
LCOE(€/MWh)
FIDyear
OffshorewindLCOE Turbinerating

6. © BVG Associates 2017
How do you solve a problem like
maria local gear ?
Local content but not at any cost, incumbants strong, be realistic
0%
20%
40%
60%
80%
100%
TOTEX DEVEX CAPEX OPEX
%UKcontent
Source: BVG Associates

7. © BVG Associates 2017
OSW market entry and growth
Quick reminder: Where the money goes
Development
and project
management
Wind turbine supply
26%
Balance of plant
19%
Installation and
commissioning
14%
Operation, maintenance
and service
39%
Project
other
1.6%
1%
Turbine
assembly
7%
2%
8%
4%
4%
Subsea export cables
2%
1%
7%
8%
1%
Installation ports
0.5%
2%
4.5%4%
3%
Operation, maintenance
and minorservice
20%
7%
12%
Blades
Castingsand
forgings
Drive train
Tower
Turbine
other
Subsea array
cables
Substations
Balance
of plant
other
Foundations
Installation
other
Subsea cable
installation
Foundation
installation
Turbine installation
OMS
other
Major service
Wind farm design
0.1%
Surveys
0.3%
Source: BVG Associates
2%
© BVG Associates 2017

8. © BVG Associates 2017
High potential diversification sub-elements – 9 ‘hotspots’
Track record, synergy, appetite, LCOE potential, investment and size
1. Project
management
2. Array cables
3. Substation
structures
4. Turbine
foundations
5. Secondary
steelwork
6. Cable
installation
7. Installation
equipment
8. Installation
support
services
9. Operations,
maintenance
& inspection
services
0
500
1,000
1,500
2,000
0
20
40
60
80
'15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30
OMSspendperyearinEuros(mil)
Installedcapacity(GW)
Total installUK Total installEU
Annual UKOMSspend (Eum) Annual EU OMSspend (Eum)
Source: BVG Associates

9. © BVG Associates 2017
Learn from those that have gone before….
Track record, synergy, appetite, LCOE potential, investment and size
1.Project management
O&G companies are already managing complex
OSW projects offshore
“There is a realisation of the benefits that oil and
gas expertise can bring to the emerging offshore
wind sector”
TNEI
3.Substation structures
These are typically one-off designs on a similar
scale to oil and gas platforms
“One of our main objectives has been to apply
our experience of designing and building offshore
platforms for O&G customers to the offshore
wind sector”
Sebmarine SLP
4.Turbine foundations
Fabrication skills from O&G can be harnessed to
produce serially manufactured structures
“The O&G supply chain has core competencies
ideally suited to offshore wind and lessons can be
learned to the benefit of both sectors ”
Global Energy Group
5.Secondary steelwork
An accessible market for companies without the
capacity for foundation manufacture and no
coastal facilities
“We have enhanced our automated cutting and
profiling services to develop a lean manufacturing
plan for competitive volume fabrication for the
offshore wind secondary steel market”
Hutchison Engineering
6.Cable installation
Most contractors with O&G experience have
learned that offshore wind shows high synergy
but has specific new challenges
“If you are a company that can offer high calibre
engineering support you can more than succeed
in offshore wind in the UK and beyond ”
Deep Ocean
7.Installation equipment
The transition from O&G equipment supply has
been made by a significant number of
companies, for example pile and cable handling
equipment, trenching and burial tools
“There is a definite appetite for robust, simple
and cost-effective solutions in offshore wind”
W3G Marine
8.Installation support services
The experience of working offshore in O&G can
be transferred to offshore wind – subsea services
such as ROVs as well as onshore services such as
marine consultancy
“The supply chain has to work hard tendering
against projects that are not fully financed….get
it right and offshore wind can be a long-term part
of a company’s strategic vision with excellent
global prospects ”
FoundOcean
2.Array cables
OEMs deploy similar skills and equipment as used
for O&G umbilical production
“We are able to develop solutions which can be
deployed in both sectors allowing us to share best
practice across industries”
Tekmar
9.Maintenance and inspection services
O&G experience of offshore logistics can shape
evolving strategies in offshore wind
“New market entrants must articulate their value
proposition. Companies must show how they can
help improve asset efficiency or reduce cost ”
3Sun

10. Delicate balancing act
Developers seeking to stimulate competition, innovation and skills
Supply chain considerations
• Realistic assumptions on ROI against
backdrop of cost reduction
• Local presence does not give you a right
to local supply – think about the logic of
supply decisions
• Demonstrate learning and
standardisation improvements in
tenders and market propositions
• Collaborative mind-set – reduces
interface risk
• Look international - trade local presence
for value proposition expansion
• Not oil and gas OR offshore wind – think
marineenergy solutions
• Developers are not the oracle – show
your expertise
• Follow your existing oil and gas
customers and demonstrate longevity
Developers and tier one considerations
• Make clear what is up for grabs, when
required and how you will select –
‘shopping list’
• Be simpathetic to multiple rounds of
tendering
• OPEX supply for indigenous companies a
given – consider rich UK history of
innovation and manufacturing expertise
• In spite of short-term political
assurances, offer security of supply via
frameworks where possible
• Be forgiving….

11. Final thoughts
Offshore developers cannot deliver innovative solutions required to reduce cost
without the full support of an engaged supply chain - new entrants are required
“Economics has made us partners and necessity has made us allies. What unites
us is far greater than what divides us “: Necessity for alliance comes from both
sectors – spreading risk
No longer can offshore wind be considered the poor relation within the offshore
energy arena - a maturing industry in its own right
Gaining a credible offshore wind track record can be a challenge: seek
demonstration or smaller sub-contract opportunities – offshore wind credibility
“Efforts and courage are not enough without purpose and direction”: approach
offshore wind with a clear value proposition addressing developer challenges–
promote skills, innovation and competition to make the leap
© BVG Associates 2017

12. Thank you - Please get in touch
Alan Duncan
(adu@bvgassociates.co.uk)
BVG Associates Ltd.
The Blackthorn Centre
Purton Road
Cricklade, Swindon
SN6 6HY UK
tel +44(0)1793 752 308
info@bvgassociates.co.uk
@bvgassociates
www.bvgassociates.co.uk
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Aberdour, Fife
KY3 0TZ UK
tel +44(0)1383 870 014
© BVG Associates 2017
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