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Targeted Innovation – an INTOG update

Philip Merson, Green Volt Bid Manager, Flotation Energy

So what is INTOG and why was it created?

Innovation and Targeted Oil & Gas (INTOG) is a Crown Estate Scotland leasing round that was created in response to demand from government and industry to support the North Sea Transition Sector Deal targets.

There are two distinct elements. Firstly, developers can apply for seabed rights for small scale innovation projects. Secondly, it also provides the opportunity to apply for seabed rights to create offshore wind projects that will provide low carbon electricity to power oil and gas installations and to help decarbonise the sector.

From the 19 applications received, 10 of these projects were for innovation (IN), which has a ceiling of 100MW per project and up to 500MW in total. Nine are for targeted oil and gas (TOG) projects, two of these TOG projects have been submitted by us, Flotation Energy and our  partner, Vårgrønn,. These  relate to deep water floating offshore wind projects in Scottish waters.

Why is INTOG important to both traditional energy companies and the UK offshore wind industry?

Powering oil and gas installations currently utilises a huge amount of gas and/or diesel – using floating wind as an alternative power source is cleaner, more sustainable and potentially cheaper.

Flotation Energy and Vårgrønn are in partnership developing two projects that aim to provide green electricity to several oil and gas installations. That’s important, because offshore platforms are energy intensive and currently, those energy needs are met with dedicated offshore gas turbines – which generate considerable quantities of CO2 emissions. We all want to reduce overall consumption of oil and gas, but our proposals also reduce the carbon intensity of the oil and gas we still need to use.

Why has platform electrification only now being considered at commercial scale – and why is this not suitable for every North Sea platform?

While it has been technically possible to electrify oil and gas installations that are close to the shore by powering from the grid, there was no guarantee that the replacement power would or could come from renewable sources. The INTOG leasing round changes that, as there is now no doubt that the power produced must come from sustainable and clean electrification. Our bids would see power generated from floating wind turbines next to the point of demand.

For some installations, for example those nearing the end of their productive life, it’s unlikely to make sense because of the significant CAPEX spend required to electrify the platforms. For facilities with power needs well into the 2030s, the economic and environmental case stacks up; and this is underpinned by the aim of the North Sea Transition Authority to see the industry decarbonise its operations. That’s why I believe it’s important that INTOG prioritises projects which can deliver quickly.

Through the INTOG leasing round, operators of those platforms had the opportunity to issue non-binding Letters of Intent (LOI) to offshore wind farm developers indicating their average power needs over a five-year period. Over the coming months, Flotation Energy will engage with these oil and gas operators with an aim of replacing these LOIs with power purchase agreements (PPA).

The winners of INTOG must pay their (non-refundable) option fees in the first half of 2023, so there is a strong need to have some firm arrangements in place with operators on this issue. If operators consider the power price to be too high, then they will not sign a PPA. Equally, for the wind farm developers, if the price offered by the operator is too low, then the economic return will be deemed too low and the project may not go ahead.

A key challenge for electrification of oil and gas platforms is the need to address reliability of power for remote, isolated facilities. We will address this need by oversizing the windfarm with respect to oil and gas demand, so that we can generate most of the energy needed offshore using the wind farm. A grid connection means that the oil and gas facilities will never be without reliable power. This means our projects will also help address energy security in the UK. During periods when the platforms’ needs are less than that being generated by the windfarms, electricity will be sold to the Grid, benefitting from the floating contract for difference (CfD) pricing mechanism.

What are the benefits of INTOG to the UK offshore wind industry?

Today, floating wind remains much more expensive than traditional fixed offshore wind as a source of power. However, the development of floating wind technology will enable us to access much greater areas of wind resource, at higher and more consistent wind speeds. Our INTOG wind farms will sell power to both offshore and onshore customers, using a niche market to spur on the development of floating wind innovation and reduce cost for the next generation of floating windfarms. We will also be positioning Scotland at the forefront of the floating wind industry globally.

There is an expectation that any new installations designed in the United Kingdom Continental Shelf (UKCS) will be electrified from the outset. This will provide the opportunity for new platforms in West of Shetland to be designed with the best utilisation of clean electricity and for robust standardisation in design and construction, which once developed, can be exported internationally.

Why is INTOG important to Flotation Energy?

Two out of nine of the TOG applications have been submitted by us, and because Flotation Energy has many engineers and technical experts with both extensive oil and gas, and renewables experience, we understand the needs and interdependencies of both sectors very well. This is further strengthened by our partnership with Vårgrønn.

Several members of the Flotation Energy team were also involved in the Beatrice demonstrator project, whereby two offshore wind turbine generators were connected to the Beatrice Alpha oil platform to deliver power. In addition, senior members of the Flotation Energy team were the visionaries behind Kincardine, currently the largest floating wind farm in the world. This means we have the practical experience around how to make the projects work.

With the INTOG sites located far from shore, floating wind is the only commercial solution available, and we have the necessary experience and partnership capability to deliver. Securing the development of these two sites will create value, opportunities and security not only for Flotation Energy and its partners, it’s also likely to provide an exportable commercial commodity whereby engineering skills and knowhow from the UK can be applied to aid offshore platform electrification internationally.

What happens now – and what are the next steps in the INTOG process?

The INTOG applications are now with Crown Estate Scotland for evaluation on both the project deliverables and the option fees bid for the sites. Results are expected to be announced in the first half of 2023.

Having started the consenting process before any of our competitors, we are in a strong position to deliver opportunities several years ahead of other INTOG applicants. For oil and gas operators, time is of the essence, and we feel confident in our ability to deliver these innovative projects with success and agility.

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