Global exploration and production (E&P) investments may take a hit this year because of the coronavirus, according to analyst Rystad Energy
“Our current assessment forecasts that COVID-19 could result in global E&P investments falling by around US$30bn in 2020 – a significant hit to the industry,” said Rystad Energy Partner and head of Oilfield Service Research Audun Martinsen.
Rystad stated that oil prices have already dipped below the US$50 per barrel threshold and could fall further if OPEC does not implement additional supply cuts. Lower oil prices will result in oil and gas companies scaling down their flexible investment budgets, especially shale operators in the US as well as some offshore exploration and production (E&P) players.
Rystad Energy said 28 FPSOs are under construction – 15 in China, seven in South Korea and Singapore, and six in other locations.
Analyst Rystad Energy expects the outbreak of the coronavirus disease to cause extensive staffing and supply shortages in these countries that will in turn delay project deliveries by at least three to six months.
“Although operators and contractors are looking into ways to make up for some of the time that will be lost by fast-tracking other stages of development, we anticipate first oil or gas for these projects will face clear delays,“ said Rystad Energy Partner and head of Oilfield Service Research Audun Martinsen.
Although workers received an extension after the Chinese New Year, many have returned to work but for fewer work hours.
Construction progress may also be slowed by supply delays, as the delivery of bulk materials, modules and equipment is hampered by transportation restrictions both within and outside of mainland China. The plant utilisation rate in China’s equipment manufacturing sector has now fallen to less than 10 per cent.
In addition, project management will face severe issues as travel bans restrict contractors, engineering firms, certification companies and E&P officials from accessing shipyards.
