Lockdown Effect- Several Oil And Gas Projects To Be Delayed


The prolonged lockdown together with the travel restrictions across several countries coupled with low oil and gas prices, will delay several oil and gas projects.

From complex deep-sea projects that depend on men and material from across the globe to refinery expansion and pipe-laying.

The oil industry is at present reeling from a twin assault of demand collapse caused by Covid-19 and a price war between key global producers that has brought about a record drop in prices. The executives are finding difficult to manage the projects due to the Lockdown and mobility restrictions.

Many complex upstream projects are likely to be hit the hardest as they depend on an intricate global supply chain of expertise and equipment. This would result in many exploration, development, and enhanced oil recovery projects to stretch beyond original schedules.

The Project delays could also translate into increased cost but that could be partly offset by an expected decline in oilfield services rates that usually follows an oil price collapse. But any sharply lower oil and gas prices pose a severe challenge.

For oil and gas producers, oil price at approximately $30/bbl makes petroleum operations unviable. These lower prices may prompt big players to delay or even shelve development of some oil and gas discoveries.

According to a report by ICRA, Upstream capex will come down this year, especially by the private sector, due to lower oil prices, There would be a delay in developing discoveries not viable at current prices. So firms may want to re engineer it.

Lower prices will have spill over effect on the cash flow at upstream companies, which in turn would affect their capex plans. Analysts feel downstream firms may not cut back on their spending and may use the current environment to extract better rates from vendors and lower project costs.