Shell Backs Out Of Yet Another Floating Offshore Wind Project

Shell will exit another floating offshore wind project, the company said on Thursday—adding another to the long list of departures from the offshore wind segment.

Shell will sell its 80% stake in the 1.25 GW MunmuBaram project in South Korea to its JV partner Hexicon, leaving the latter with a 100% stake in the project, Shell said. The compensation to Shell for the remaining stake in the project will be $5 million in cash, plus another $50 million in the form of a profit-sharing agreement spread over three years, commencing when the project starts.

Shell decided last year to scrap its reduce its oil production by 1 to 2% annually. Shell—along with other major oil companies—have found that transitioning to alternative energies such as wind hasn’t lived up to the hype when it comes to expected returns. Meanwhile, oil continues to prove its mettle in the profit department, helped along, of course, by OPEC’s production cuts and geopolitical turmoil.

Nevertheless, Big Oil has profited more than $250 billion since the start of the Russian/Ukraine war. Of course, that comes after a couple of hard covid-induced years. In fact, according to a recent Global Witness report, the five largest oil companies in the world, BP, TotalEnergies, Exxon, Chevron—and yes, Shell—have distributed some $200 billion among their shareholders.

Wind projects, on the other hand, have suffered a significant blow to its profitability thanks to the skyrocketing costs of raw materials and equipment, and developers are backing out around the globe.

In the United States, for example, even after the Department of the Interior approved in November 2023 large-scale offshore wind power project Empire Wind 2, developers just months later scrapped the project, citing its compromised commercial viability. BP and Equinor booked $840 million in impairments associated with the failed wind project, and Orsted—the world’s largest offshore wind developer—recently took impairment charges worth $4 billion after canceling two offshore wind projects planned off the coast of New Jersey. 

By Julianne Geiger for Oilprice.com

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