Shell lambasted by partners as it seeks exit from offshore wind farm

The Times: Shell lambasted by partners as it seeks exit from offshore wind farm

May 1, 2008
Robin Pagnamenta, Energy and Environment Editor

Royal Dutch Shell yesterday provoked a storm of anger among its partners in the world’s largest offshore wind proposal when it revealed plans to sell its stake.

The world’s second-biggest oil company said that it planned to sell its 33 per cent stake in the London Array project, which plans for as many as 341 turbines off the Kent and East Sussex coasts. Shell, which reported record quarterly profits of £3.9 billion this week, is understood to have approached Centrica, the owner of British Gas, and other utilities about a possible sale.

Shell said the decision was made following reappraisal of its UK and European assets. While the value of the stake is unclear, the project is expected to cost £2 billion to build. London Array is hoped to generate 1,000 megawatts of electricity — enough to power a quarter of London’s homes without the emission of millions of tonnes of carbon dioxide.

Shell’s partner on the project, E.ON, the German utility giant, criticised Shell for its decision to pull out. Paul Golby, the chief executive of E.ON UK, said that he was disappointed at the decision, which has plunged the project into crisis.

“I believe that at the very least, some delay to the project is now inevitable. While we remain committed to the scheme, Shell has introduced a new element of risk into the project which will need to be assessed.”

Dr Golby said that the economics of the project were marginal at best because of rising steel prices, bottlenecks in turbine supply and competition for key equipment.

The other partner on London Array is Dong Energy, a specialist in wind power that is majority-owned by the Danish Government.

Shell insisted that it remained committed to renewable energy. A spokeswoman said that most of its investment was focused on the booming US wind energy industry.

Nevertheless, its decision to exit the London Array project is a huge blow to the Government’s ambitious proposals to build 33 gigawatts of offshore capacity using wind generation around the UK by 2020 — enough to power every home in the country.

The Department for Business, Enterprise and Regulatory Reform expressed optimism that the project would proceed.

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