Fall in crude prices and reduced demand from end-user markets during the COVID-19 pandemic has significantly impacted the oil and gas industry forcing companies to postpone investments and stall existing projects until the situation improves.
Offshore Technology has conducted a poll to assess which oil and gas segments among petrochemical, refinery, upstream, and midstream will pick-up faster than others after COVID-19.
Analysis of the results shows that a majority think the petrochemical segment would bounce-back faster than the rest.
The petrochemical segment is expected to be more resilient, according to a majority 32% of the respondents, followed by the upstream and refinery segments as opined by 26% of the respondents each, while 15% feel that midstream will pick-up faster than the other segments.
The analysis is based on responses received between 444 responses 01 May and 01 June.
COVID-19 impact on oil and gas segments
Oversupply and subdued demand have created an imbalance in the oil and gas industry, according to GlobalData. A drop in demand for petrochemicals in China, which has approximately 29% of the global capacity, has impacted the oil and gas industry and its supply chain.
Midstream segment to be impacted the most
The midstream sector is the hardest hit with companies resorting to short-term measures to relieve pressure, according to GlobalData. The pandemic has forced several petrochemical projects to be delayed due to supply chain disruptions and labour unavailability.
The US has the largest number of projects that have been postponed, followed by China, according to GlobalData’s Oil & Gas Intelligence Center. Further, projects that were in early stages of development and pending final investment decisions are expected to be postponed.
Refinery segment hit by the COVID-19 pandemic
The refinery segment is also hit as stringent travel restrictions have drastically reduced the demand for transportation fuel. Extended periods of storage are leading to the deterioration of products such as gasoline and jet fuel and increasing inventory costs, adds GlobalData. Refinery operators have been forced to reduce output and even suspend operations amid these conditions.
Impact on the upstream segment
The upstream segment is expected to witness a reduction in production, drilling suspension, and stalling of projects in the short-term. In the long-term, upstream companies are expected to restructure their business and focus on cleaner options such as gas, light oil, and renewables.