Oil and gas equipment and service providers are dependent on high capital expenditure from oil and gas companies. The COVID-19 pandemic has impacted investment and activity in the industry as oil and gas demand has fallen.
Verdict has conducted a poll to assess the biggest concern for oil and gas equipment and service providers post COVID-19 pandemic.
Analysis of the poll results shows that fall in oil prices and cuts in 2020 upstream capital expenditure (capex) were the biggest concerns among providers, as voted by 33% of the respondents each.
Approximately 20% of the respondents voted that order cancellations/postponements were their biggest concerns, while 13% opined that supply chain disruptions were their biggest concern.
COVID-19 impact on oil and gas equipment and service providers
The fall in demand for oil and gas has led to an oversupply of crude oil in the industry forcing companies to cut production and delay project execution, which is ultimately affecting the services industry. Rig usage is considered as one of the important indicators of activity in the industry and has witnessed a steady decline since the start of the pandemic, according to GlobalData.
Even those activities that would have been undertaken during a low-price environment, such as maintenance work and development drilling, have also been cancelled due to the pandemic. The demand for oilfield services is expected to drop by 25% across the world in 2020, according to Rystad Energy. The industry is expected to recover in 2022-2023 although the demand is not expected to be at the same level as pre-COVID-19 levels.
Several companies in the services industry are taking appropriate measures to tackle the impact of the pandemic including reduction in capital expenditure, halting non-critical work and adopting furlough/lay-off strategy. They are also examining the structure of their supply chain to understand the ways in which disruptions to equipment supply can be mitigated, adds GlobalData.