Coronavirus to draw down global exploration and production investments
Coronavirus, or COVID-19 could result in global exploration and production (E&P) investments falling by around $30 billion in 2020 – a significant hit to the industry.
However, the company expects some of these investments to come back in 2021.
“Oil prices have already dipped below the $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,” the company said in its report.
As the virus has caused reduced industrial activity and travel restrictions in China and beyond, much of this year’s global expected oil-demand growth will be lost, the company believes.
Moreover, Rystad Energy expects the outbreak of the coronavirus disease delay deliveries of floating production, storage and offloading by at least three to six months.
“If the epidemic escalates, the delays could increase to nine or even 12 months, especially taking into account the restricted time windows for heavy transport, installation and hook-up. The average development time for an FPSO is 36 months, meaning that companies could face a 30 percent delay.”
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, Rystad Energy anticipates first oil or gas for these projects will face clear delays.