The effect of the COVID-19 virus on global demand for oil and gas, along with an ongoing price war that has sent oil prices tumbling at an unprecedented rate, are poised to wreak havoc on new project development plans for this year. According to an impact analysis from Rystad Energy, exploration and production (E&P) companies are likely to reduce project sanctioning by up to USD 131bn, or about 68% year-on-year, as they batten down the hatches to weather the storm.
In 2019 total onshore and offshore project sanctioning reached some USD 192bn. At the outset of this year, Rystad Energy forecast that projects representing about USD 190bn worth of investments would be sanctioned this year. Recent developments, however, have spawned a major revision to that estimate.
If the price of Brent crude averages around $30 per barrel in 2020, which we see as an increasingly likely scenario, we estimate that total project sanctioning will be reduced to just USD 61bn. Some USD 30bn of the overall expenditure is tied to onshore projects and USD 31bn to offshore.
