Understanding the sector impact of COVID-19
Oil & Gas
Oil & Gas and Chemicals companies are in the midst of a two-pronged crisis: an oil price war and the impact of COVID-19. Oil prices dropped dramatically a few weeks ago when the Organisation of Petroleum Exporting Countries (OPEC) and Russia failed to agree on production cuts. OPEC and its allies (OPEC+) in a bid to stabilise falling prices, agreed to cut its combined output by 9.7 million barrels per day each in May and June from the agreed baseline. The timing of the agreement coincides with a period when the global crude oil market has more crude oil than it can use and potentially store.
The oil supply/demand imbalance is occurring in tandem with the depressed need for chemicals and refined products stemming from industrial slow-downs and travel restrictions in the wake of COVID-19. Consequently, the short- to medium-term outlook for high-cost producers, smaller operators and those companies with high levels of debt appears to be more challenging now than ever.
International Oil Companies (IOCs), indigenous oil & gas and chemicals companies are responding by cutting capital and operational expenditures, which will filter down to suppliers and oil servicing companies.
Topics covered in this article:
- Potential long-term impact on Oil & Gas and Chemicals Companies
- Key questions leaders should ask, including about alternative channels, and ongoing relationships with key suppliers and customers.
- Impact on the Nigerian Oil and Gas Sector
- Sector-relevant regulatory measures to cushion the impact of COVID-19
- Practical next steps