Covid-19 Executive Briefing

Understanding the economic impact of the Covid-19 pandemic and the implications for the oil & gas sector

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- ECONOMIC IMPACT -

Latest update: 21 July 

Many economists have cut their GDP forecasts. The 2020 consensus forecast for GDP growth is currently negative and many predict a recession.

Major market indices are improving and, while concern over Covid-19 remains volatile, business optimism continues to improve.

5.9%

The Israeli Finance Ministry expects its economy to contract by 5.9% in 2020;
further lockdowns could cause the economy to fall by 7.2%.

-4.7%

The IMF estimates growth of -4.7% for the Middle East and Central Asian region.

Impact of Covid-19 on employment

- SECTOR IMPACT: oil & gas -

Latest update: 15 July 

GlobalData analyst view:

"The oil & gas industry has been heavily impacted on all fronts as falling demand and geopolitical ambitions are greatly impacting company finances. The upstream sector will bear the brunt of the Covid-19 outbreak as the falling oil prices will impact production economics."

Global oil and gas demand remains uncertain in the near term as a resurgence of COVID-19 infections may force countries to re-impose  partial lockdowns.

After a 16 % year-on-year fall in Q2, IEA expects a slight
improvement in oil demand during H2 2020.

However, oil prices are likely to remain under pressure and would significantly impact company revenues – BP Plc anticipates a $17.5bn write down in Q2 due to low prices.

impact on capital expenditure

IOCs, NOCs, and independents have cut capex and opex in tune with low oil prices. These cuts are primarily being felt in drilling in the US shale plays, in postponement of project FIDs, and reductions in exploration budgets.

Announced cuts to capex guidance for 2020 now exceed $140bn as of 14 July 2020, considering more than 230 companies.

As of 14 July 2020, around 320 upcoming projects and more than 525 active assets have been impacted across the value chain.

Major FID postponements to date include Woodfibre LNG, Rovuma LNG, the Scarborough gas field and the Pluto LNG expansion.

Major FID postponements to date include Woodfibre LNG, Rovuma LNG, and the Scarborough gas field and Pluto LNG expansion.

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