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June 5, 2020

Impact of Covid-19 on the Middle East and African Oil and Gas Pipeline Sector

The Middle East and the African oil and gas pipelines sector has been impacted severely due low oil prices and weak demand as a result of the Covid-19 outbreak. The pandemic has impacted progress of several projects, resulting in pipelines getting stalled or delayed.

By GlobalData Energy

The Middle East and the African oil and gas pipelines sector has been impacted severely due low oil prices and weak demand as a result of the Covid-19 outbreak. The pandemic has impacted progress of several projects, resulting in pipelines getting stalled or delayed. Some of the major projects that have been impacted include Niger–Benin (2,000 km) and Basra–Aqaba Oil (1,700 km).

One of the primary strategies that a majority of pipeline operators have been falling back on, is to halt or delay any avoidable current or upcoming projects. With uncertainty looming large on the prospective project, the contractor of the Niger-Benin pipeline has halted all construction activities pertaining to the project. It is unclear when the project might start commercial operations. On similar lines, construction work on the 272 km South Pars Phase 11 (I & II) pipelines has been delayed due to COVID-19. This is likely to push the start year of the project by a year to 2023.

Besides stalling or delaying project progress, pipeline companies of the region are seeking financial assistance or reducing capital expenditures. The Algerian state-owned pipeline company, Sonatrach is in discussion with foreign investors for funds to carry out its upcoming projects. Saudi Aramco, on the other hand, is adopting the strategy of reducing capex by nearly 26% for the year 2020.

The oil and gas pipeline sector might be rife with consolidations, as the current crisis could push medium and small companies to the brink of extinction.  Although pipeline companies are making enormous efforts to tide over the current situation, it might take a longer to recoup, given the recurring nature of the pandemic and its scale of the impact on the oil and gas sector.

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