Impact of Covid-19 on global oil and gas pipeline sector

GlobalData Energy 22 September 2020 (Last Updated September 22nd, 2020 14:48)

Impact of Covid-19 on global oil and gas pipeline sector

The global oil and gas pipeline sector has been facing several hardships due to the Covid-19 pandemic-induced demand destruction and a weak global economic outlook. Consequently, delaying financial investment decisions (FIDs), slashing capital expenditure, and stalling avoidable projects have become a norm for several pipeline operators to sustain and tide over the current crisis. While these approaches may provide a temporary solution, the global pipeline sector might look for long-term sustainability and stay prepared for any such catastrophe in the future.

One of the primary measures that a majority of pipeline operators adopted to contain the losses is to delay (final Investment Decision) FIDs of upcoming projects. Driftwood Pipeline’s FID, initially expected in 2020, is now planned in 2021 as its developer, Tellurian Investments Inc. has been struggling to secure financing partners for its entire project. Similarly, Phillips 66 Partners, one of the joint developers of Ace pipeline, postponed FID on this project, which is likely to push the start of the project by a couple of years from the initially planned 2020.

Global pipeline companies are reducing capex. Woodside Petroleum Limited has cut its capex by almost two thirds (62%) for the year 2020, while Santos Ltd, has reduced capex by nearly 37%.

Since fuel consumption has taken a huge hit, owing to the lacklustre performance of transportation and tourism sectors, pipeline companies are forced to come up with novel strategies to to bail out from the current crisis. However, with the recurring nature of pandemic, pipeline operators globally might encounter an uphill task to fully recover from its devastating impacts.