Equinor pulls plug on huge offshore wind project

Equinor has pulled the plug on a 2GW floating offshore wind farm it was developing off the coast of Australia, despite its local partner Oceanex Energy having remained keen to proceed with the pioneering project.

Project company Novocastrian Offshore Wind announced today that it has “made the decision not to proceed with the feasibility licence” offered by the Australian government for the site off New South Wales.

“The decision reflects a combination of broader global challenges affecting the offshore wind industry and developers, and project-specific factors,” said Novocastrian.

Novocastrian was to be located in the Hunter offshore wind zone, near the city of Newcastle, a few hours north of Sydney, with the potential to power more than a million homes.

But Novocastrian subsequently asked for more time to decide on accepting this licence.

That came in the wake of Equinor being involved in a high-profile showdown with US President Donald Trump over his administration’s issuance of a stop work order for its fully permitted Empire Wind project off New York, which is in the midst of construction. The order was later lifted but the disruption appears to have made Equinor rethink its offshore wind plans elsewhere.

Writing on LinkedIn today, Evans said: "After 6 years of hard work, it is with disappointment that I announce that the Novocastrian Offshore Wind Farm will not continue as we at Oceanex Energy were unable to reach agreement with our project partner in Novocastrian Wind to accept the Feasibility Licence offered by the Australian Government."

"The shareholders of Oceanex fully supported acceptance and remain positive about progressing offshore wind off the Hunter Valley coast, in whatever form, going forward."

Energy minister: 'Australia caught in global headwinds'

Speaking in a radio interview today, Australia’s Minister for Climate Change and Energy Chris Bowen said that Oceanex was still “all set to go raring” on the project but noted that it is a joint venture with Equinor and the partners “don’t agree” on that front.

“Equinor is withdrawing from renewables investment around the world at the moment, which, I will be very frank with you, I find very disappointing,” he said. He also said Equinor had cut its renewables budget “and we're caught up in that, so that's disappointing.”

“And also, offshore wind is facing some global international investment headwinds right at the moment, partly driven by some uncertainty out of the United States. So, we are caught up in that. So, that's very disappointing.”

Equinor has been scaling back its plans for investment in offshore wind in response to the problems of spiralling supply chain and capital costs that have lashed the industry. The company has altered its strategy to prioritise investments with higher returns and core markets.

In February, Equinor lowered its decade-end capacity target for renewables to 10-12GW, from 12-16GW previously. This also includes conversion into assets of financial stakes in Orsted, in which it recently became a 10% owner, and Scatec.

Asked whether Oceanex could go it alone on the project, Bowen said: “They're too small. They're a great company, but they are too small to undertake such a big project alone. They don't have the access to the capital.”

“They are experts in their field,” he said. “They would be the first to say this is too big just for them. They need a partner and frankly, an international partner, given there's no offshore wind being built in Australia yet, it is quite common around the world, and so they're not able to proceed without that partner.”

“But their interest and hopes for the Hunter is undiminished,” he added.

Asked whether offshore wind in Australia is a non-starter now, Bowen said no, pointing to the fact there are six offshore wind zones under development and the Gippsland site off the southern state of Victoria “remains strong.”

Equinor’s decision to pull the plug on Novocastrian comes after it did the same for several other projects in Australia this year.