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April 20, 2020

Covid-19 impact and response of oil and gas services industry

By GlobalData Energy

The Covid-19 pandemic impact has shattered the crude oil demand as the majority of the oil and gas services end-user industries are witnessing a slowdown amid lockdowns.

This market environment coupled with crude oversupply concerns are creating an imbalance resulting in a crude price crash. Companies across the oil and gas value chain are re-evaluating their Capex guidance, as well as re-aligning their operations to offset the demand slowdown. This is leading to delays and deferrals in project execution and having a negative impact on the services industry.

The rig usage, an important business barometer for the services industry, has witnessed a decline lately leading to less utilization of oilfield equipment and services. The service industry is also grappled with supply chain, workforce management and cost overrun challenges for EPC projects across the value chain. Even major O&M/turnaround maintenance projects are being pushed back as companies focus only on critical operational maintenance to manage Opex.

In response to the challenges in the services industries, service companies are announcing measures, such as Capex-Opex reduction as per client’s re-alignment and halting non-critical activities to manage liquidity and stay afloat. These companies are also optimizing resource strength by adopting furlough/lay-off strategy as many projects are getting temporarily halt, withdrawn or delayed. Additionally, service companies are also re-evaluating their existing supply chain structure and finding ways to manage equipment supply and project risks.

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