The African Energy Chamber, AEC, has described the impact of COVID-19 as the biggest shock in the history of oil and gas sector as demand collapse has caused billions of dollars investment to disappear.
This was contained in a statement made available to news men from African energy chamber, stating that the year 2020 has challenged the industry unlike any year in history.
They expressed that compared to other years, the difference is even more extreme as the brunt of this reduction occurred during the widespread lockdown in the second quarter to halt the Corona virus outbreak.
“2020 has likely challenged the industry unlike any year in its history. A relatively stable growth in liquid demand has indeed been observed over the last 20 years. Even during the financial meltdown in 2008 and 2009, the demand overall was very resilient. In 2020 however, demand is currently expected to be about 10 million barrels of liquids less per day than pre-COVID-19 expectations.”
“The change is even more extreme as the brunt of this reduction occurred during the widespread lockdown in the second quarter to halt the Corona virus outbreak. Most notably, the West Texas Intermediary reference price even ended up trading at negative levels as there simply was no ability to store more oil. The market forces therefore led to widespread production shut in North America as well as an OPEC agreement to cut production by about 10 million barrels per day.”
“The release further stated that COVID-19 has triggered a big short-term negative revision in oil price outlook , while the mid to long term outlook still points to an oil price at least north of $50/bbl based on the assumption that a solution will be found to the current COVID-19 pandemic, pushing global economic activity towards pre-COVID-19 levels.”
As a consequence of less revenue, the various operators in the world have also slashed their investment outlooks considerably.
“The combined reduction for 2020 to 2025 in expected global upstream CAPEX is of $690 billion compared to the initial expectation in February 2020 before COVID-19 was declared a pandemic. The reduction is front loaded implying that it is 2020 and 2021 where one should expect to see the biggest changes with almost 30 percent lower spend than pre-COVID-19 expectations.”