As geopolitical tensions continue to disrupt global fuel markets, Nicolaj Splidt Jakobsen, Head of Offshore at Dan-Bunkering, and Arne Lohmann Rasmussen, Chief Analyst and Head of Research at Global Risk Management, discuss how offshore wind developers can strengthen supply chain resilience, manage fuel price volatility and protect renewable energy projects from escalating operational risks.
PES: A warm welcome to PES. It’s great to speak to you both today. The conflict in the Middle East has caused a lot of disruption to global supply chains. Where do you see the biggest impacts on renewable projects related to fuel supply and operations?
Nicolaj Splidt Jakobsen: The impact of the war is not limited to a sector or a geographical area. All industries and all continents will be impacted by the conflict. Companies in the renewables sector must take action to secure their future projects against exposure to supply constraints.
Arne Lohmann Rasmussen: A significant share of global oil and Liquefied Natural Gas (LNG) flows through the Strait of Hormuz. It has in practice been partially or fully restricted at times, and consistently insecure since the initial closure, leaving vessels stranded and reducing available supply to global markets. This type of disruption creates sudden supply shocks rather than gradual imbalances.
NSJ: For renewable projects already in the installation phase, there’s a big risk that their fuel budget will be exceeded if the price hasn’t been secured in advance. We have seen a major increase in fuel prices worldwide and all regions have been impacted with prices rising by as much as threefold. These old prices have been the benchmark by which companies plan their fuel budgets for ongoing and future projects. This can be a costly mistake for project P&Ls.
ALR: At the same time, the impact is not uniform across energy markets. Refined fuel products such as marine gasoil and diesel are reacting more aggressively than crude oil itself, with price increases of up to 20 to 25% within very short periods during peak escalation. For offshore wind operations, this is critical, as these are the fuels directly used in installation and support vessels.
NSJ: With the increasing cost of fuel and disruption to its availability, the project owners or vessel owners need to consider price vs availability. Betting on a lower cost next week can jeopardise the availability and put your operation at risk of a standstill until marine gasoil is available again.
ALR: Another emerging trend is that countries are increasingly prioritising domestic energy security over global supply flows. Export restrictions and reduced willingness to supply international markets have already been observed, which further tightens availability and increases regional price volatility.