Brazil’s vast potential for offshore wind generation and the challenges associated with implementing this new industry in a country that is still investing a lot of money in oil and natural gas projects were among the hot topics discussed in Upstream’s latest digital conference.

With more than 130 gigawatts of future projects under environmental review by the country’s federal regulator Ibama, offshore wind can be a game changer for Brazil, as the South American nation takes the first steps to implement a robust regulatory framework to address the sector’s needs.

A decree setting out legal guidelines for the implementation of offshore wind projects in Brazil was issued earlier this year and was considered a first step to unlock future investments.

In parallel to the decree, federal lawmakers are considering a bill drafted by Jean Paul Prates, a senator from the opposition Workers’ Party, that aims to fill some of the regulatory gaps that investors believe have prevented the country from beginning to realise its considerable potential in this sector.

“When it comes to the bill of law, I think it will bring more predictability and legal comfort than the decree, but I think both are standing in the right direction,” says Mauro Andrade, business development executive at Brazilian logistics player Prumo, which manages the Acu port in Rio de Janeiro state.

“One topic I would highlight in the bill is the cost associated with granting areas for the installation of offshore wind farms. We should avoid additional costs with signature bonuses, because every penny will count.”

The bill, which is similar to the concession of acreage for oil and gas projects in Brazil, features not only the payment of signature bonuses but also a fee — initially set at 5% and later reduced to 2% of gross revenues — that has sparked some criticism.

“We are putting the final touches on the bill in consensus with the sector and suppliers,” Prates explains.

Brazil’s energy wind association ABEEolica is playing its part in the discussion of the new regulatory framework by advocating for potential investors and calling for any fee to be closer to 1% instead.

“We are doing everything we can to have the bill approved by the end of the year, but we still have one commission to go through in the Senate before that,” Prates says, adding the bill should be sanctioned in mid-2023 at the latest.

ABEEolica chief executive Elbia Gannoum believes the first offshore wind farms could be operational in Brazil by the end of the decade, but for that to happen, dedicated auctions will likely be required to propel the industry.

Gannoum also emphasises the importance of establishing a local supply chain to help develop the Brazilian offshore wind industry, as about 40% of the total costs associated with a project are related to logistics and infrastructure.

With that in mind and eager to attract companies interested in manufacturing equipment for the segment, the Acu port is emerging as a potential hub for renewable energy projects.

Originally conceived to be a gateway for the development of the Brazilian oil and gas sector at a time when pre-salt discoveries were propelling a wave of investments, the port is now morphing as the energy transition grows in importance.

Andrade says: “We do have a green port concept where we want to explore and incentivise the production and use of renewable energy to be able to attract capital.”

“We are extremely well positioned, not only with existing infrastructure, but also because part of the supply chain that attends the oil and gas sector will also serve the offshore wind industry. There are a lot of synergies and competences to be captured.”

There are 13 projects seeking environmental permits for companies such as Equinor, Shell, Brazilian utility Neoenergia and Spain’s Ocean Winds to install wind farms in the vicinity of Acu.

Location

Determining an optimal location for offshore wind installation is critical, and traditional players in the oil and gas sector such as Norwegian seismic data company TGS and Brazilian offshore shipping group OceanPact are playing a role in de-risking subsurface challenges.

“Developers want more information sooner and with higher quality. They need to understand wind conditions, have information on tides, currents and more, so we are building a platform that integrates all data,” says Katja Akentieva, TGS vice president of new energy solutions for the Western Hemisphere.

OceanPact chief executive Flavio Andrade says the oil industry already possesses a wealth of data on wind, wave and climate conditions that could assist offshore wind projects, but stresses a good platform for sharing this information does not exist at the moment.

“Planning is very important and data is crucial for good planning,” he says. “I am sure we have several hot spots for offshore wind in Brazil.”

Drawing investment

As more companies look to invest in renewable energy projects, financing will be key.

Giovani Loss, partner at Brazilian law firm Mattos Filho, already sees a market trend where banks and financial institutions are redirecting funding to cleaner energy sources that traditionally would have gone to oil and gas projects.

“The relationship between financing renewables and oil and gas projects is one of the most interesting aspects of this shift in the energy industry,” Loss says.

“We are seeing investment funds creating specific products for investing in clean energy, like green bonds, and this is driving a major change in the industry.”

The exponential increase in new renewable energy projects also is leading to a massive spike in the number of mergers and acquisitions in the sector.

Loss says that with oil and gas companies entering the sector — as well as private equity firms — the number of deals is on the rise.

“The market is really hot right now,” he says.

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