As a result of current market pressures, the oil and gas industry in Asia is facing an unprecedented uncertainty. Companies are being forced to rethink the ongoing project timelines and ‘projects in the pipeline’ for 2020, while projects expected to take final investment decision (FID) this year are at elevated risk of delays, according to GlobalData.
However, China is now in the recovery phase and its major national oil companies (NOCs) are set to focus on their domestic output growth goals.
Cao Chai, Oil and Gas Analyst at GlobalData, said field developments in India have already been disrupted and more are likely to be at risk as the country is currently enduring a 21-day lockdown.
“The latest news that India reduced its domestic natural gas price to a record low of US$2.39 per mmBtu will further impact the country’s top gas producer ONGC.”
“Elsewhere in the region, the construction at the Merakes field in Indonesia is disrupted due to a shortage of workers and challenge of logistic supply, operator ENI has declared force majeure on the project as a result of COVID-19,” detailed Chai.
GlobalData anticipates that the projects in Asia targeting FID this year will inevitably face delays, as countries continue to struggle through the uncertainties.
It notes that large scale capital intensive projects which are facing financial constraints or with existing uncertainties will be difficult to draw investment. Meanwhile, smaller-scale operators will require capital discipline to maintain ongoing operations and growth, therefore projects awaiting FID would likely be postponed too.
Breakeven Prices and Level of Risk of Asian O&G Projects Targeting FID in 2020. Image source: GlobalData Upstream Analytics.
However, China could be an exception. GlobalData forecasts that the country, which was the centre of the COVID-19 outbreak earlier this year, will see the planned projects progress as the country recovers from the worst of the virus, though minor delays may still occur.
Domestic developments are expected to be prioritised over international investment for China National Offshore Oil Corporation (CNOOC), after its recent CAPEX review to trim the annual budget by 10-15 per cent.
China Petroleum & Chemical Corporation (Sinopec) marginally cut its CAPEX by 2.5 per cent, which will come predominantly from its refining business and sales sector.
To date, there are no confirmed budget cuts from China National Petroleum Corporation (CNPC), however, it has announced an adjustment of 2020 production and operational plans in accordance to market trends.
“While Chinese NOCs are focusing on raising domestic output and cutting overseas operations, elsewhere in Asia delays and disruptions are seen across the upstream sector in 2020,” Chai added.
“The projects under development are at risk of slowdowns and operational disruptions as countries have taken stricter measures to control the spread of COVID-19, a multi-year low in upstream project FIDs is also expected in the region.”
