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March 18, 2020updated 20 Mar 2020 3:08pm

Coronavirus may delay upcoming oil and gas projects in China

By GlobalData Energy

China has several large oil and gas projects under construction or commissioning stages throughout the country. Some of these projects may be delayed due to the locking down of entire cities and the travel restrictions imposed after the coronavirus outbreak. As a result, oil and gas personnel movement to project sites is curtailed and material movement has also been impacted.

Among upcoming oil and gas projects in China, projects located in the highly impacted Hubei province are more likely to face delays as it is the epicentre of the epidemic and the entire province was locked down due to the virus outbreak. Hubei mainly has petrochemical projects under construction and the realisation of 3.3Mtpa of petchem capacity is at stake due to the virus impact. These projects are also capital intensive with a total project cost of $2.4bn.

Hubei also has a natural gas pipeline under construction, ‘Xinqi’ pipeline. It is a major pipeline with a length of 840km and a project cost of $2.3bn and may face the heat.

In addition, the delay of the projects can have ripple effects globally due to their cross-border dependencies, especially the LNG regasification projects. China mainly sources LNG from Australia, Qatar, and Malaysia. Possible delay in the construction of LNG regasification terminals in China can, in turn, affect the plans of LNG suppliers, who might have signed contracts for exports to these terminals. FPSO deliveries to international clients are also at stake, as China is a major hub for the construction of these vessels.

Though China is not really known for upstream production projects, a few important projects are in progress in offshore locations such as the Bohai Bay, East China Sea, and the South China Sea. These projects may not be delayed as apparently there is no interruption in operations at the existing offshore projects, especially in Bohai Bay. There are four unconventional projects as well, and these are also unlikely to be delayed due to their location in the least affected provinces.

The impact of the coronavirus on other segments such as liquids storage projects is also likely to be minimal, including on the major projects, ­ ‘Zhanjiang IV’ and ‘Shanshan Expansion’. Each of these projects has a capacity of 44Mmbbl and project costs of $2.5 bn, and $1.6bn respectively.

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