Global oil and gas demand has been significantly affected by the strict restrictions imposed to contain the Covid-19 outbreak. With a worldwide pandemic recently declared by the World Health Organisation and the oil price war resulting from the OPEC+ disagreement, operators have been reviewing their capex spending and scaling back on budgets, the 2020 project outlook in Asia’s upstream sector is facing unprecedented uncertainty. Majority of projects expected to take FID in 2020 are at elevated risk of deferral.
Two major natural gas projects in Vietnam, Ca Voi Xanh and Block B Gas Development, will not see the FIDs to go ahead in 2020 as project participants have been long concerned about the uncompetitive economics. Jadestone decided to push the project timelines for Nam Du and U Minh fields, which are still pending FDP approval from the Vietnamese Government. Elsewhere in the region, in Malaysia’s Sarawak basin, out of four gas projects awaiting FIDs in 2020, Sapura Energy will likely prioritise Jerun, benefiting from its relatively lower breakeven gas price and strong demand for new feedstock to the MLNG plant; other projects are at risk of not securing the investment necessary to reach FID this year.
The short-term outlook for Asia’s upstream sector is looking particularly weak. As governments take stricter measures to control the spread of Covid-19 across the region, projects under construction are also at risk of timeline slowdown and operational disruptions, only extremely efficient and robust enough projects will be able to survive the price downturn and go ahead this year.